CENTRAL BANK OF TRINIDAD AND TOBAGO · The Trinidad and Tobago economy continued to feel the impact of the downturn in international energy prices and in domestic production of natural

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O U R P U R P O S EThe primary purpose of the Bank is the promotion of monetary, credit and exchange conditions most favourable to the development of the economy of Trinidad and Tobago.

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T H E M A N D A T E

CENTRAL BANK ACT CHAPTER 79:02Act 23 of 1964

The Central Bank of Trinidad and Tobago is a corporate body established by an Act of Parliament, the Central Bank Act, Chapter 79:02.

The primary mandate of the Central Bank is set out in Section 3 (3) of the Act:

3 (3) The Bank shall have as its purpose the promotion of such monetary, credit and exchange conditions as are most favourable to the development of the economy of Trinidad and Tobago, and shall, without prejudice to the other provisions of this Act: –

(a) have the exclusive right to issue and redeem currency notes and coins in Trinidad and Tobago;

(b) act as banker for, and render economic, financial and monetary advice to the Government;

(c) maintain, influence and regulate the volume and conditions of supply of credit and currency in the best interest of the economic life of Trinidad and Tobago;

(d) maintain monetary stability, control and protect the external value of the monetary unit, administer external monetary reserves, encourage expansion in the general level of production, trade and employment;

(e) undertake continuously economic, financial and monetary research;

(f) review- (i) legislation affecting the financial system; and (ii) developments in the field of banking and financial services, which appear to it to be relevant to the exercise of its powers and the discharge of its duties; and generally, have the powers and undertake the duties and responsibilities assigned to it by any other law.

(g) generally have the powers and undertake the duties and responsibilities assigned to it by any other law.

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INSURANCE ACT CHAPTER. 84:01

From May 2004, the Central Bank was charged with the administration of the Insurance Act and the supervision of insurance registrants and pension plans.

FINANCIAL INSTITUTIONS ACT CHAPTER. 79:09

The Central Bank also administers the Financial Institutions Act, under which banks and other financial institutions and payment systems are regulated.

The primary objective of the Central Bank is to maintain confidence in, and promote the soundness and stability of, the financial system in Trinidad and Tobago.

Other objectives of the Central Bank under this Act are to: – (a) promote the existence of efficient and fair banking and financial services markets; (b) supervise licensees to determine whether they are in sound financial condition; and (c) maintain an appropriate level of protection for depositors of licensees.

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L E T T E R O F T R A N S M I T T A L

CENTRAL BANK OF TRINIDAD AND TOBAGO ANNUAL REPORT 2017

LETTER OF TRANSMITTAL

December 2 , 2017 The Honourable Colm Imbert Minister of Finance Eric illiams Finance Building Independence Square PORT OF SPAIN

REF CB G Dear Minister Imbert,

In accordance with Section 5 1 of the Central Bank Act Chap.7 02, I enclose herewith the Report of the Central Bank of Trinidad and Tobago for the year ended September

0, 2017, together with a copy of the Annual Audited Statement of Accounts certified by the Auditors.

ALVIN HILAIRE Governor

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T A B L E O F C O N T E N T S

Governor’s Foreword

P A R T 0 1

P A G E

12P A G E

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P A G E

1LEADERSHIP AND ORGANISATIONAL STRUCTURE- Strategic Planning

REVIEW OF ACTIVITIES- Monetary Policy & Economic Developments- Monetary Operations - Financial Stability - Internal Operations - Community Engagement

REPORT OF THEAUDITOR GENERAL

FINANCIAL STATEMENTS- Consolidated Financial Statements

APPENDICES

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The Central Bank held a steady course in 2016/17 while making some major strategic plan achievements in the context of a complex domestic economic setting.

The Trinidad and Tobago economy continued to feel the impact of the downturn in international energy prices and in domestic production of natural gas and crude oil. The direct implications on the Government’s energy revenue, and the country’s export earnings spilled over into a contraction in overall economic activity, some increase in unemployment and a decline in international reserves. At the same time, inflation remained very low and credit expansion, particularly to businesses, relatively tepid.

On the international front, there was general evidence of acceleration in the momentum of the economic recovery. For some countries however, natural disasters, climate change, political instability and depressed commodity prices, created major challenges for reform efforts. Most Caribbean nations, including those oil importers benefitting from lower petroleum prices, continued to concentrate on fiscal adjustments while attempting to shore up economic growth possibilities.

The monetary policy of most Central Banks remained generally accommodative in support of increasing economic activity and returning inflation to targets. While largely anticipated, the unwinding of the stimulus programme in the United States heightened attention to the possibilities of capital flows in response to the increases in the Fed Funds rate.

In this environment of low domestic inflation and sluggish economic activity in tandem with narrowing TT/foreign interest differentials, monetary policy in Trinidad and Tobago was finely balanced. The Bank kept

Govern

or, Ch

airman

of the B

oard

G O V E R N O R ’ S F O R E W O R D

GovernorChairman of the Board

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the ‘repo’ rate at 4.75 per cent throughout the year, while adjusting its open market operations to take into account the public sector’s dynamic financing requirements.

Meanwhile, Trinidad and Tobago’s overall financial system remained sound. The Bank intensified its supervision of credit risks given the potential for a decline in financial institutions’ asset quality to the extent that borrowers may have been experiencing difficulty in servicing their loans. Collaboration with regional and domestic supervisory agencies was strengthened by the adoption of formal information sharing mechanisms. The Bank’s capacity to supervise diverse financial groups and Systemically Important Financial Institutions was improved by the implementation of the consolidated supervision framework, while progress was made on expanding stress testing. Implementation of the new Basel II/III capital regime also progressed along with the CLICO resolution plan

In streamlining its currency issue, the Bank discontinued the issuance of the 1 cent coin in July 2017 and changed the metallic composition of the other coins to much more cost-effective metal-plated materials. The effective public education programmes that accompanied these changes formed part of a broader strengthening of communication involving streamlining of the Bank’s website, simplifying and extending coverage of monetary and financial sector issues, and a relaunch of the National Financial Literacy Programme.

Internally, the Bank made significant strides in strengthening governance and efficiency. These included reforms in procurement and the tenders’ process, as well as the information and physical security frameworks. Moreover, a whistle blowing policy was finalized, whereby staff can anonymously report incidents to an independent external agency. At the same time, the staff expanded its charitable engagement with disadvantaged communities, while the Bank continued its cultural contribution via the auditorium events, and supported scholars and young students through scholarships in partnership with De La Rue and vacation internships. Our staff benefitted from extensive technical training throughout the year which provides a solid foundation for the work of the institution.

Looking forward, the coming year is expected to be filled with interesting challenges, ranging from continued macroeconomic adjustment to the growing pervasiveness of digital currencies. The Central Bank is already preparing to deal with these issues while shoring up its internal processes to further strengthen governance and efficiency in the service of Trinidad and Tobago.

CENTRAL BANK OF TRINIDAD AND TOBAGO ANNUAL REPORT 2017

viii

at 4.75 per cent throughout the year, while adjusting its open market operations to take into account the public sector’s dynamic financing requirements. Meanwhile, Trinidad and Tobago’s overall financial system remained sound. The Bank intensified its supervision of credit risks given the potential for a decline in financial institutions’ asset quality to the extent that borrowers may have been experiencing difficulty in servicing their loans. Collaboration with regional and domestic supervisory agencies was strengthened by the adoption of formal information sharing mechanisms. The Bank’s capacity to supervise diverse financial groups and Systemically Important Financial Institutions was improved by the implementation of the consolidated supervision framework, while progress was made on expanding stress testing. Implementation of the new Basel II/III capital regime also progressed along with the CLICO resolution plan In streamlining its currency issue, the Bank discontinued the issuance of the 1 cent coin in July 2017 and changed the metallic composition of the other coins to much more cost-effective metal-plated materials. The effective public education programmes that accompanied these changes formed part of a broader strengthening of communication involving streamlining of the Bank’s website, simplifying and extending coverage of monetary and financial sector issues, and a relaunch of the National Financial Literacy Programme. Internally, the Bank made significant strides in strengthening governance and efficiency. These included reforms in procurement and the tenders’ process, as well as the information and physical security frameworks. Moreover, a whistle blowing policy was finalized, whereby staff can anonymously report incidents to an independent external agency. At the same time, the staff expanded its charitable engagement with disadvantaged communities, while the Bank continued its cultural contribution via the auditorium events,

and supported scholars and young students through scholarships in partnership with De La Rue and vacation internships. Our staff benefitted from extensive technical training throughout the year which provides a solid foundation for the work of the institution. Looking forward, the coming year is expected to be filled with interesting challenges, ranging from continued macroeconomic adjustment to the growing pervasiveness of digital currencies. The Central Bank is already preparing to deal with these issues while shoring up its internal processes to further strengthen governance and efficiency in the service of Trinidad and Tobago.

Governor Chairman of the Board

Dr. Alvin Hilaire

GovernorChairman of the BoardDr. Alvin Hilaire

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L E A D E R S H I P &O R G A N I S A T I O N A L

S T R U C T U R E

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EXECUTIVE DIRECTORS

EXECUTIVE DIRECTORS

Dr. Alvin HilaireGovernor

Mr. Surendra ArjoonPeriod of Appointment:Feb. 4, 2016 – Feb. 3, 2019

Ms. Luana BoyackPeriod of Appointment:Feb. 4, 2016 – Feb. 3, 2019

Mr. Richard DuncanPeriod of Appointment:Feb. 4, 2016 – Feb. 3, 2019

Dr. Sandra SookramDeputy Governor

Ms. Vyjanti BeharryPeriod of Appointment:Feb. 4, 2016 – Feb. 3, 2019

Mr. Vishnu DhanpaulPeriod of Appointment: Mar. 13, 2017 - Mar. 12, 2020

Mr. Lancelot JackPeriod of Appointment:Feb. 4, 2016 – Feb. 3, 2019

B O A R D O F D I R E C T O R S

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Ms. Nicole ChapmanSenior Manager, Legal, Contract and Corporate Secretariat Services

Mrs. Nicole CrooksSenior Manager,Human Resources, Industrial and External Relations

EXECUTIVES

SENIOR MANAGERS

Dr. Alvin HilaireGovernor

Mrs. Michelle Chong Tai-BellInspector of Financial Institutions (Ag.)

Ms. Arvinder BharathSenior Manager,Financial Technology andInformation Security

Dr. Sandra SookramDeputy Governor

Ms. Marie BorelySenior Manager,Finance, Accounting andSupport Services

S E N I O R M A N A G E M E N T

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Mr. Neil DingwallSpecialist Advisorto the Governor

Mrs. Michelle Francis-PantorDeputy Inspector,Banks, Non-Banks andPayment Systems Oversight

Mr. Patrick SolomonSenior Specialist Advisor,Corporate Governance, Controls and Compliance

SENIOR MANAGERS

Mr. Alister NoelSenior Manager,Operations

Ms. Dianne PierreSenior Specialist Advisor,Strategic Projects

S E N I O R M A N A G E M E N T

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MANAGERS

Ms. Wendy D’ArbasieManager, Reserves and DomesticMarket Management

Mr. Vaughn HallidayManager, Support Services – Facilities

Mrs. Angela Henry-SmallManager, Information Services – Statistics

Mrs. Heather HugginsManager,Human Resources

Mr. Naveen LallaManager, Pensions and Intermediaries

Ms. Nadira Rahamatula-RajackManager, Anti-Money Laundering

Mrs. Denise Rodriguez-ArchieManager, Internal Audit

Mr. Garnett SamuelManager, Research

Ms. Joanne SeeramManager, Customer Support andInformation Security

Mr. Dominic StoddardFinancial Services Ombudsman

Mr. Christopher SubryanManager, Finance and Accounting

Mrs. Sharon VillafanaManager, Banking Operations

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ASSISTANT MANAGERS

Ms. Patricia BabwahAssistant Manager, Legal and Contract Services

Ms. Joanne Charles-EdwardsAssistant Manager, Support Services – Procurement

Mr. Kendall CuffyAssistant Manager,Banks and Non-Banks

Ms. Leslie Des VignesAssistant Manager,Payment Systems

Ms. Leslie-Ann FigaroAssistant Manager, Banking Operations

Mr. Kevin FinchAssistant Manager, Macro Prudential Analysis

Ms. Amrita GosineAssistant Manager, External Relations

r riffitAssistant Manager, Risk Management andIT Governance

Ms. Loren HarrinauthAssistant Manager, Applications

Ms. Lenore HodgeAssistant Manager, Information Services – Knowledge and Information Management

Mr. Sherwin KerrChief of Security, Security

Dr. Reshma MahabirAssistant Manager, Quantitative Research

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ASSISTANT MANAGERS

Ms. Isha MarshallAssistant Manager, Finance and Accounting

Ms. Lisa QuintyneAssistant Manager, Infrastructure

Mrs. Marlene Quirico-CallendarAssistant Manager,Support Services –Administration

Mrs. Sonia RaphaelAssistant Manager,Banking Operations

Ms. Natalie RoopchandsinghAssistant Manager, Insurance

Ms. Ingrid StewartAssistant Manager, Banks and Non-Banks (On Assignment at CLICO)

Mrs. Sandra Swan-DanielAssistant Manager, Finance and Accounting

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SPECIALIST ADVISORS

SPECIALISTS

Mrs. Sheriza Hassan-AliSpecialist Advisor,ITS Governance andRisk Management

Ms. Suzanne NeroSpecialist Advisor,Pensions

Ms. Sandra RachaSpecialist Advisor,Energy Policy

Ms. Jacinta SohunSpecialist Advisor,Insurance

Ms. Roxanne SolomonSpecialist Advisor

Mr. Anson CalisteSpecialist,Project Management

Ms. Denise DanielSpecialist,Industrial Relations

O R G A N I S A T I O N A L S T R U C T U R E3 17

BOARD

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GOVERNOR

Human Resources

& Industrial Relations

External Relations

Risk Management

& IT Governance

Operational Risk

Management & BCP

Health, Safety & Environment

Security Finance & Accounting

Financial Technology & Information

Security

Infrastructure

Applications

Legal, Contract & Corporate Secretariat

Services

Support Services

Facilities

Administration

Procurement

Insurance, Pensions, Actuarial Analysis

Pensions & Intermediaries

Insurance

Actuarial Analysis

ecialist vis r er lic ecialist vis r

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Oversi t

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ervisi I teri I I

Banking Operations

Reserves & Domestic

Market Management

Research

Quantitative Research

Macro Prudential

Analysis

Economic Intelligence

Information Services

Statistics

Knowledge & Information

Management

Bank & Non-Banks

Anti-Money Laundering

Banks & Non-Banks

Payment Systems

Insurance, Pensions, Actuarial Analysis

Pensions & Intermediaries

Insurance

Actuarial Analysis

ecialist vis r er lic ecialist vis r

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Macro Prudential

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Economic Intelligence

Information Services

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Knowledge & Information

Management

Bank & Non-Banks

Anti-Money Laundering

Banks & Non-Banks

Payment Systems

CENTRAL BANK OF TRINIDAD AND TOBAGO

S T R A T E G I C P L A N 16 17 1

1 16 17The Bank’s Strategic Plan for the period 2016/17 to 2020/21 was well on course at the end of FY 2016/17. The year involved extensive analysis, resource identification, planning and mobilisation as the foundation was built for the five year Plan. During the first year of the Plan, conceptual work was completed on all 23 projects selected to realize the goals set out under the three strategic themes of monetary policy, financial stability and internal operations while components of several projects were finished and some aspects of other projects far advanced. Significant progress was made in the three key areas: the framework for the conduct of monetary policy has improved in the context of a record of very low inflation; the assessment and conduct of financial sector supervision was advanced in a stable financial setting; and a stronger basis for greater efficiency and governance is progressively being established. Intense discussion and collaboration across the Bank and heightened tracking of each project during FY 2016/17 resulted in the modification of the implementation schedule, with 12 of the projects compressed and the remaining 11 projects extended. The Bank’s Strategic Plan Project Implementation Update Year 1 is available on the Bank’s website at https://www.central-bank.org.tt/about/strategic-plan/project-implementation-update-year-1 and the major achievements for the year are represented on the following page.

O U R M I S S I O NTo be a premier, trusted and dynamic Central Bank committed to a better Trinidad and Tobago.

O U R V I S I O NThe Bank shall have as its purpose the promotion of such monetary, credit and change policies as would foster monetary and f inancial stability and public confidence and be favourable to the economy of Trinidad and Tobago.

MO

NE

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F I NA

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I N T E R N A L O P E R AT I O

NS

Streamline currency issue

and banking operationsThe one cent coin was discontinued and new metal plated coins were introduced. Hence a major public education programme was

launched outlining the rationale and schedule for altering the metallic composition of coins

and the elimination of the one cent piece.

Enhance management of international reserves

With World Bank assistance, the specific aspects of a Portfolio Management

Systems suitable to the Central Bank’s needs were identified and a rigorous international tender process completed.

Improve governance standards

in f inancial institutionsThe International Monetary Fund (IMF) worked with the Bank in significantly

bolstering our approach to dealing with financial groups, as opposed to the

traditional focus on individual entities.

Improve risk-based supervisionThe Central Bank introduced the Basel II/III capital

adequacy framework, which will significantly strengthen how banks treat with risk.

Strengthen internal corporate governance

and eff iciencyMajor work was done, with Board input, on shoring up internal governance, notably in

strengthening procurement processes.

The whistle-blowing policy was implemented and outreach

mechanisms were enhanced.

Develop transparent staff

feedback mechanism and effective

wellness programme

Advance Central Bank public

education and communication

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R E V I E W O F

A C T I V I T I E S 2 0 1 6 - 2 0 1 7 1

1. The Bank’s f inancial year runs from October 1, 2016 to September 30, 2017.

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In 2017 the global economy began to recover from the events of the last few years, as many of the major advanced and emerging economies experienced either accelerated growth or recovered from a recessionary period. Inflation was a concern with many of the advanced nations recording rates below the policy target. In addition the 2016 US election and the ongoing Brexit negotiation added to some of the uncertainty in the economic environment. However, by September 2017 these concerns had somewhat abated. Indeed in its October 2017 Global Economic Outlook the International Monetary Fund increased its expectations for global economic growth over 2017 and 2018.

During the financial year the Trinidad and Tobago economy continued to adjust to lower revenue from the main economic sector – the energy sector. International energy prices recovered compared to the previous year, with oil prices hovering around US$50 per barrel. For much of the 2016/17 fiscal year (FY) the energy sector was beset by falling production, as the shortage of available natural gas resulted in the shutdown of several of the methanol plants. However, the coming on stream of BPTT’s Juniper project in August 2017 has had a positive impact on natural gas production levels. The fallout from the energy sector continues to reverberate in the rest of the economy, as the indicators of economic activity suggest that almost every sector in the economy contracted over the first three quarters of the FY; the impact in the final quarter remains to be seen.

The continued adjustment of the economy was partially reflected in the unemployment rate which averaged 4 per cent in 2016, up from 3.4 in 2015. The latest information available from the Central Statistical Office indicates that in the first quarter of 2017 the unemployment rate increased to 4.5 per cent. Overall retrenchment notices slowed in 2017, with the sectors most affected by retrenchment being Petroleum and Mining and Manufacturing. The unemployment rate will likely be affected by

the fall in the participation rate, as persons opt out of the formal economy.

The subdued economic conditions as well as low international inflation rate resulted in the domestic inflation rate remaining well contained. In September 2017 headline inflation was 1.2 per cent, food 1.8 per cent and core 1.1 per cent. The low food inflation rate occurred in spite of floods that would have affected the domestic agricultural output; these impacts are expected in future months. The core inflation rate for September 2017 was the lowest rate since March 2004. This was due to declines in the prices of high value items such as foreign motor vehicles; major household appliances; photographic, information processing and sound equipment, as well as charges associated with renovation.

Given the developments in the economy and the inching up of interest rates in the developed economies, the balance of payments experienced a deficit with the continued decline in the country’s level of reserves. While improvements in energy prices resulted in a positive impact on the value of energy exports in 2017, the current account still recorded a deficit as the surplus in the merchandise trade balance was offset by deficits in the services and primary income accounts. At the end of September 2017 the county’s level of reserves was US$8.5 billion or 9.8 months of import cover. Over the period October 2016 to September 2017 the TT dollar depreciated by less than 1 per cent (0.6 per cent).

Central Government accounts are estimated to register an overall deficit of $12.6 billion (8.5 per cent of GDP) in FY 2016/17. Despite higher energy receipts, the substantial fall-off in non-energy revenues precipitated a decline in total revenue from the previous year. In FY 2016/17 total revenue is estimated at $37.8 billion, $7.1 billion less than in FY 2015/16. Central Government total expenditure is estimated at $50.5 billion in FY 2016/17, $3.0 billion lower

M O N E T A R Y P O L I C Y A N DE C O N O M I C D E V E L O P M E N T S

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than FY 2015/16. The fall in total expenditure was largely on account of lower spending on the capital programme, transfers and subsidies and wages and salaries. The FY 2016/17 deficit was financed through a US$252.5 million drawdown from the Heritage and Stabilisation Fund (HSF), as well as borrowings from domestic and external sources. On the domestic front, the Central Government borrowed $8.2 billion under the Development Loans Act for budgetary support. The increase in external debt for the FY 2016/17 reflected a US$300.0 million loan from the Andean Development Corporation (CAF), in addition to disbursements from existing loans.

In light of the subdued economic conditions, the low inflation rate and the narrow TT-US differentials, the Central Bank maintained the repo rate at 4.75 per cent over the period. The Bank in effecting its open market operations has contained liquidity levels, which averaged $3.2 billion for the current fiscal year compared to $3.7 billion in the previous period.

Fiscal activity during the year added $6.9 billion to financial system liquidity, significantly lower than the $7.8 billion injected over the previous year.

Treasury bill rates remained steady over FY 2016/17. Over the 12 months ending September

2017, the short-term 3-month treasury rate remained relatively flat at 1.20 per cent, while the one year rate slipped 8 basis points. On the longer end of the yield curve, the 10-year treasury rate experienced a 2 basis point decline.

Given the stability of the repo rate the commercial bank prime lending rate remained unchanged at 9 per cent for the 2016/17 fiscal year. While the weighted average lending rates moved marginally upwards from 8.12 per cent in September 2016 to 8.24 per cent in September 2017, average deposit rates remained sticky at 0.61 per cent. The interest rate spread was effectively increased by ten basis points to 7.62 per cent at the end of fiscal 2016/17.

Credit remained constrained given the domestic economic conditions. Lending to the private sector rose by 3.6 per cent, year-on-year, in September 2017, with loans to businesses rising by just 0.4 per cent. Consumer credit growth was higher at 4.5 per cent, albeit somewhat slower than the 7.6 per cent recorded in the year earlier period. Meanwhile, the expansion in real estate mortgage loans remained relatively robust at 6.7 per cent in September 2017.

OIL PRICESaveraged

5(WTI)

PRIVATE SECTOR CREDIT

grew by

THE DOMESTIC ECONOMY

declined by

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THE REPO RATE

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5

HEADLINE INFLATION

averaged

2 2

UNEMPLOYMENTaveraged

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C H A R T B : I N F L A T I O N R A T E Source: Central Statistical Office

C H A R T C : U N E M P L O Y M E N T R A T E Source: Central Statistical Office

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C H A R T E : R E P O R A T E Source: Central Bank of Trinidad and Tobago

C H A R T F : P R I V A T E S E C T O R C R E D I T G R O W T H Source: Central Bank of Trinidad and Tobago

-6.0

-5.0

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2013 2014 2015 2016 2017f

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M O N E T A R Y O P E R A T I O N S

BANKING OPERATIONSDuring the FY 2016/17, the Central Bank engaged in several strategic projects to improve the efficiency of its banking operations and service provided to all stakeholders. These included changing the metallic composition of coins, eliminating the 1 cent coin and updating clearing house arrangements.

CURRENCYChange in Metallic composition of

1Coin

As part of its strategic plan for the period 2016/17 - 2020/21, the Bank embarked on a currency reform project that affected the country’s coinage in 2017. Two major decisions taken as part of this strategic initiative were (i) to change the metallic composition of the 5 cents (5¢), 10 cents (10¢) and 25 cents (25¢) pieces from alloy-based to more cost-effective metal-plated materials; and (ii) to cease the issuance of the one cent coin (1¢) and to withdraw this lowest denomination from circulation. The Bank engaged in a series of stakeholder discussions with the commercial banks, government agencies and the general public, and a national public education drive to promote a better understanding of the changes that were to occur and to facilitate a smooth transition following the removal of the 1¢ coin from circulation. The Bank worked with the commercial banks to ensure that the necessary mechanisms would be put in place to treat with the issuance of the new coins and the elimination of the 1¢ coin. The services of a new minter, Royal Canadian Mint, were contracted by the Bank to produce the new suite of metal plated coins with nickel and copper overlay. In

keeping with its objectives, the Bank stopped issuing 1¢ coins on July 1, 2017, launched a nationwide coin education campaign, published rounding guidelines for cash transactions and placed new metal-plated 5¢, 10¢ and 25¢ coins into circulation (Box1). Over the financial year approximately 18.4 million coins were redeemed (Chart I), with approximately 16.5 million redeemed in the three-month period July to September 2017.

CHART I : VOLUME OF COINS REDEEMEDOct er 2016 e te er 2017

0

3

6

12

15

1 5 10 25 50

VOLUME OF COINS ( ILLION )

Source: Central Bank of Trinidad and Tobago

CHART I : VOLUME OF COINS REDEEMEDOctober 2016 – September 2017Source: Central Bank of Trinidad and Tobago

1COINS REDEEMED NEW NOTES ISSUED CURRENCY IN

CIRCULATION

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CURRENCY IN CIRCULATIONCurrency in circulation as a percentage of Gross Domestic Product hovered around 6 per cent in FY 2016/17, compared to the 5.4 per cent recorded in the previous period. The annual growth of currency in circulation of 3.1 per cent (to $8,888 million) (Chart II) was higher than the previous year’s growth of 1.7 per cent.

6

7

5

8

10

2016 2017 2015 2016 2014 2015 2013 2014 2012 2013

T E E P SEP

TT$(BILLION )

CHART II : CURRENCY IN CIRCULATIONSource: Central Bank of Trinidad and Tobago

The volume of new notes issued by the Bank

increased by 17 per cent to a total of 78 million, compared with a total of 66 million new notes issued in the previous year. While the $100 note represents the largest value of currency in circulation (about 90 per cent), the $1 represents the largest volume of notes (Chart III).

Though the Bank stopped issuing one cent coins in mid 2017, the 1¢ remained the most widely circulated coin, representing approximately 49 per cent of the total volume of coins in circulation (Chart IV). Bank statistics indicate that an average of 52 million 1¢ pieces have been placed into circulation annually over the past five years. However, in FY 2016/17, the Bank issued less than 50 per cent of the volume of 1¢ coins than 2015/16 (Chart V). There was also a marked decrease in the volume of other coins demanded by the commercial banks during this period. The Bank’s public education campaigns prompted the general public to redeem both 1¢ pieces and other coin denominations in much larger volumes than previously at the commercial banks. With such an improvement in the re-circulation of coins in the banking system, commercial banks substantially reduced the volume of coins they ordered from the Central Bank.

16%

9 1% 4 % 7 3%

$100

$1

$50 $20 $10 $5

344%

4

7%

2

5¢

50¢

1¢

10

¢ 5¢

164%

15 4%

19

%

3% 4

%

CHART II I : VOLUME OF NOTES IN CIRCULATION BY DENOMINATION AS AT

PT R 01Source: Central Bank of Trinidad and Tobago

CHART IV: VOLUME OF COINS IN CIRCULATION BY DENOMINATION A AT PT R 01Source: Central Bank of Trinidad and Tobago

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C H A R T V : C H A N G E I N T H E V O L U M E O F C O I N S I S S U E D : 2016/17 vs 2015/16 Source: Central Bank of Trinidad and Tobago

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R O U N D I N G G U I D E L I N E SAs of July 1, 2017, the Central Bank ceased issuance of one cent coins. The Central Bank intends to withdraw the one cent coin from circulation and, in due course, the one cent coin will no longer be legal tender. Therefore, over time, there will be fewer coins in the system and price rounding on cash transactions will be required.

When the one cent coin is demonetized, Regulations will be introduced to mandate and enforce rules on rounding. Until such time, these voluntary guidelines are intended to assist the public with the transition.

WHAT IS ‘ROUNDING’?Rounding means the lesser or greater adjustment of a final cash payment to the nearest 5 or 10 cents in accordance with the rounding guidelines set out in the Table below.

R O U N D I N G U P TO THE NEAREST MULTIPLE OF 5 CENTS

R O U N D I N G D O W N TO THE NEAREST MULTIPLE OF 5 CENTS

A payment of $1.03 shall be rounded to $1.05 A payment of $1.01 shall be rounded to $1.00




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CLEARING AND SETTLEMENTS SYSTEMS Real Time Gross Settlement (RTGS)The RTGS electronic system facilitates the clearance and settlement of large value ($500,000 and over) and time sensitive transactions among the eight commercial banks. It remains the most significant payment system in the domestic economy in terms of value, settling a total value of $523.8 billion for the period October 2016 to September 2017. The total volume of transactions settled amounted to 64,799, an increase of approximately 6.1 per cent from the previous period (Chart VI).

Cheque Clearing House

Arrangements – Introduction of Electronic Cheque ClearingsThe Central Bank worked along with the eight commercial banks to review the software solutions for a cheque clearing facility. A Project Review Committee was formed which included representatives from all commercial banks. The review also included an exposure to the country models from representative banks. The Committee is expected to continue work in the new year.

FINANCIAL INSTITUTIONS RESERVE MONITORINGThe required statutory cash reserve ratios for commercial banks and non-bank financial institutions remained unchanged at 17 per cent and 9 per cent respectively of their prescribed liabilities.

Required reserves for banks and non-banks increased by an average of 4.8 per cent and 0.7 per cent respectively over the period. In addition to the statutory cash reserves, the commercial banks continued to hold a remunerated secondary reserve of 2 per cent of their prescribed liabilities. A fixed rate of 0.25 per cent was paid on these holdings.

As net fiscal injections trended downwards the Bank used the opportunity to allow a $1.5 billion fixed deposit held by commercial banks to mature during the financial year. Interest paid to the commercial banks on the matured fixed deposit during the financial year totaled $11.25 million.

REGIONAL ARRANGEMENTSBank of Guyana Consolidated DebtThe principal outstanding as at September 30, 2017 owed by the Bank of Guyana is US$15.6 million. The debt is a consolidation of sums owed to the Central Bank of Trinidad and Tobago and the Government of Trinidad and Tobago.

Banco Latinamericano De Exportaciones S.A. (BLADEX)The Central Bank holds a total of 160,626.5 Class A shares in BLADEX. During the financial year, dividends totaling US$247,364.8 were received.

Government SecuritiesDuring FY 2016/17, the Central Bank continued to execute its mandate of managing TT-dollar liquidity in the banking system. In this regard, the Bank intervened regularly in the money market through open market operations (OMO). During the financial year, ninety-nine (99) auctions of short-term securities were arranged, with an aggregate face value of $30,624.4 million issued. Over the same period $27,423.0 million matured.

The Bank also, on the request of the Ministry of Finance, arranged the issue of two (2) Central Government bonds for the purpose of financing the fiscal budget. These bonds, each with a face value of $1,000.0 million, were arranged and auctioned in December 2016 and February 2017. On both occasions, these bonds were over-subscribed and issued at par.

VOLUME OF TRANSACTIONS

50 000

60 000

65 000

55 000

70 000

2012 13 2013 14 2014 15 2015 16 2016 17

ART RT T VOLUME OF TRANSACTIONSSource: Central Bank of Trinidad and Tobago

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Foreign Exchange MarketThe domestic foreign exchange market experienced tight liquidity conditions during the financial year 2016/17 as foreign currency inflows continued to decline. Purchases of foreign exchange from the public by authorised dealers fell by 18.7 per cent from the previous year. Energy sector conversions, which account for the majority of inflows to the market, declined by 25 per cent. As a result of the lower inflows, sales of foreign currency to the public declined by 12.0 per cent.

The Central Bank maintained its support to the domestic foreign exchange market, selling US$2,031 million to authorised dealers, compared with US$2,014 million in the previous financial year. The TTD/USD exchange rate depreciated marginally by 0.6 per cent to $6.7803/US$1.00 as at September 2017 from $6.7421/ US$1.00 in September 2016.

In accordance with the Bank’s Strategic Plan 2016/17 to 2020/21, a revised US dollar cash facility and a foreign exchange liquidity guarantee accessible by all authorised dealers were implemented. The Bank intends to assess the efficacy of the amended facility and will continue to evaluate the overall framework for the management of the domestic foreign exchange market.

NET OFFICIAL RESERVES AT

5OF IMPORT COVER

0RETURN ON

INVESTMENT

FOREIGN RESERVES MANAGEMENT Low energy prices continued to affect the value of net official reserves which declined to US$8.5 billion as at September 30, 2017 from US$10 billion a year earlier (Chart VII). Receipts from the energy sector totaled US$523.2 million during the financial year, down from US$735.3 million a year earlier. Other inflows to the reserve portfolio included US$252.5 million from the Heritage and Stabilisation Fund and loan proceeds of approximately US$300.0 million from the Corporación Andina de Formento (CAF). Foreign currency sales to the domestic market continued to be a major outflow from the portfolio.

The Bank continued to manage the reserve portfolio in accordance with the objectives of capital preservation, liquidity and achieving an acceptable rate of return within the approved risk framework. The portfolio earned 0.83 per cent during FY 2016/17 compared with a return of 0.64 per cent in the previous year. The improvement in the portfolio’s performance was primarily due to higher coupon and deposit rates.

In an effort to enhance the management of the official foreign currency reserves, the Central Bank, guided by the World Bank Treasury, utilised a rigorous tender process for the selection of a Portfolio Management System (PMS). This system is expected to improve operational efficiency and assist with the management of financial risks. The implementation phase is scheduled to commence towards the middle of FY 2017/18.

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F I N A N C I A L S T A B I L I T YDespite the challenging macroeconomic situation, the financial sector continued to perform well with strong profitability, relatively high capital buffers and adequate liquidity and contributed approximately 7.8 per cent of GDP in 20172. Credit risk remains elevated as the challenging economic environment is likely to adversely impact borrowers’ ability to fund their debt obligations, the value of their collateral, and banks’ loan portfolios. The asset base3 of the financial system showed little growth, ending the period at just over $300 billion. The sectors supervised by the Central Bank, namely banking, insurance and pensions accounted for

78 per cent of financial system assets (Chart VIII). Seven institutions collectively account for about 50 per cent of financial system assets (four banks, two large insurers and the Unit Trust Corporation).

Over the last year, the Central Bank advanced key strategic projects aimed at enhancing resilience and fostering sound governance and risk management practices. In this regard, the Central Bank took steps to enhance the effectiveness of risk based supervision and deepened collaboration with supervisory and other agencies. Furthermore, major strides were made to progress the CLICO resolution.

Commercial Banks

Development Banks

Occupational Pension Funds

Credit UnionsNon-Bank Financial Institutions

Insurance Companies

DICUTCNIB 9%

7%1%

43%

1%

15%

3%4%

16%

CHART VIII : FINANCIAL SECTOR ASSETS AS AT

PT R 01Source: Central Bank of Trinidad and Tobago

Net Official Reserves Import Cover

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2

4

6

8

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12

0

2

4

6

8

10

12

14

US$(BILLION)

MONTHS

SEPT2013

SEPT2014

SEPT2015

SEPT2016

SEPT2017

CHART VII : NET OFFICIAL RESERVES AND IMPORT COVER Source: Central Bank of Trinidad and Tobago

2. Ministry of Finance: Review of the Economy, 2017.3. Includes CLICO and British American but excludes Central Bank assets.

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ENHANCING RESILIENCE AND IMPROVING THE EFFECTIVENESS

The Central Bank’s strategic project to implement revised minimum capital requirements, based on the international Basel II/III standards, is geared toward improving capital management and risk governance in the banking sector. A second Quantitative Impact Study (QIS 2) completed in July 2017 showed that all licensees were able to meet the proposed minimum capital adequacy ratio (CAR) of 10 per cent, the minimum Tier 1 ratio of 7 per cent and the minimum Common Equity Tier 1 (CET1) ratio of 4.5 per cent. The project is on track for roll out of the standardized formula by June 2018.

Review of Credit Risk Management Practices in the Banking SectorThe Central Bank has continued to keep a close watch on credit risk. A thematic review of governance and credit risk management practices in the banking industry revealed that overall, practices are sound. In recent times, consequent on the increase in credit risk, banks have tightened lending standards, are watch-listing high risk customers and sectors, added resources, deployed technology to improve delinquency management and employed earlier work-out solutions such as refinancing, debt consolidation and rescheduling. The Central

Bank has observed that several banks have improved the reporting of credit issues to their Boards of Directors, and have been more aggressive in recovery efforts.

Consolidated SupervisionWith the increasing conglomeration of the regional financial industry, the Central Bank has intensified its focus on its assessments of group risks, related party exposures, parent company leverage and assessing the potential for contagion. The Bank has placed particular emphasis on financial connections among systemically important institutions. The Central Bank of Trinidad and Tobago and the Central Bank of Barbados collaborated to develop a reporting framework for regional financial groups, which is designed to obtain ongoing relevant information on the financial performance and key risks of significant subsidiaries in such groups.

Monitoring the Growing Impact of Cyber RisksIn light of continued phishing and skimming attacks which have led to compromising of payment cards and other fraud, the Central Bank monitored and engaged financial institutions to ascertain the actions being taken to improve the security of their systems. Institutions have commenced upgrading of ATMs and systems and have expedited the use of the EMV4 chip and pin technology for payment cards.

ENHANCING RESILIENCE AND IMPROVING

Credit Risk Review

Consolidated Supervision Cyber Risks

4. EMV® is a global standard for credit and debit payment cards based on chip card technology taking its name from the card schemes Europay, MasterCard, and Visa - the original card schemes that developed it.

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DEEPENING COLLABORATION WITH SUPERVISORY AND OTHER AGENCIES Supervisory Collaboration and Sharing of InformationThe Central Bank advanced supervisory collaboration with other regulatory authorities, which is essential for effective consolidated supervision of domestic and cross-border financial groups. The Bank:

• Hosted and participated in several regional teleconferences and supervisory colleges for systemically important financial groups, sharing financial and prudential information on the performance and risks of the financial entities.

• Signed a bilateral Memorandum of Understanding with the Financial Services Authority in St. Vincent in July 2017 to facilitate supervisory cooperation and information sharing on regional financial groups.

• Assumed chairmanship of the Caribbean Group of Banking Supervisors (CGBS) for a two-year term commencing July 2017. One of its first duties as Chair was coordinating the Group’s response to the Caricom Governors’ De-Risking Action Plan.

National Anti-Money Laundering Committee (NAMLC)The Central Bank continued to contribute to the work of the NAMLC by issuing a revised

draft Anti-Money Laundering/Combatting the Financing of Terrorism (AML/CFT) Guideline to its regulated financial institutions in July 2017 for review and comment. The revised Guideline seeks to provide more detailed general and sector specific guidance to financial institutions on implementing a risk-based approach to AML/CFT, including applicable customer due diligence requirements. In addition, the Bank worked closely with the NAMLC to propose amendments to the Proceeds of Crime Act and Regulations Chapter 11:27. Work was also done with the NAMLC on the Miscellaneous Provisions (Mutual Assistance in Criminal Matters, Financial Intelligence Unit of Trinidad and Tobago, Customs and the Exchange Control Act) Act, 2016 and the Companies (Amendment) Bill, 2016 both of which were laid in Parliament.

External Auditors and the Institute of Chartered Accountants of Trinidad and Tobago (ICATT)The Central Bank places reliance on the work of external auditors in its assessment of financial condition of licensees. In an effort to leverage the work of the external auditors, the Central Bank developed and issued a draft Code of Practice outlining protocols for engaging with external auditors of financial institutions. The Code was adapted from the Basel Committee on Banking Supervision’s Guidance on External Audits published in 2014.

CENTRAL BANK OF TRINIDAD

AND TOBAGO

DEEPENING SUPERVISORY COLLABORATION

EXTERNALAUDITORSAND ICATT

SUPERVISORYCOUNTERPARTS

MOF, BIR AND TTSEC

NATIONAL AML

COMMITTEE

FINTECH

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Inland Revenue and the Trinidad and Tobago Securities and Exchange CommissionAs required by the Tax Information Exchange Agreement (United States of America) Act 2017 (TIEAA), the Central Bank prepared a Guideline on the implementation of the TIEAA in collaboration with the Board of Inland Revenue and the Trinidad and Tobago Securities and Exchange Commission. The Guideline was submitted to the Minister of Finance for approval and was laid in Parliament on September 15, 2017.

FinTechThe Central Bank also continued to engage and collaborate with regional regulators through its representation on the Caribbean FinTech Working Group established by the CARICOM Governors to advance regional payments and to recommend alternative and innovative payment solutions to treat with the ‘de-risking’5 issue.

STRENGTHENING TECHNICAL AND ANALYTICAL CAPACITY IN SUPERVISION AND RESOLUTIONDuring 2016/17, the Bank sought technical assistance from the IMF’s Caribbean Regional Technical Assistance Centre (CARTAC) and trained supervisors in a number of key areas including crisis resolution, Basel II/III, stress testing and consolidated supervision. The Bank also engaged CARTAC to review the credit union sector’s degree of systemic risk to the country’s financial stability, review progress in modernizing the legislative framework, and make appropriate recommendations for consideration to strengthen the prudential regulation of credit unions.

ADVANCING THE COLONIAL LIFE INSURANCE COMPANY LIMITED

INSURANCE COMPANY

RESOLUTION PLANThe Resolution Plan for CLICO and BAT was shared with the public on March 27, 2015, and involved phased payments to CLICO’s policyholders and creditors from the monetization of CLICO’s assets. In July 2016, special directions were

issued to facilitate an earlier settlement of liabilities to unconnected “third party” Short-Term Investment Product (STIP) holders and mutual fund holders including the Government, as assignee of the rights of mutual fund holders and STIP holders.

Pursuant to these directions, on July 13, 2016, Government received two further payments totalling $2.6 billion which represented settlement of its Statutory Fund liabilities, as assignee of rights of Statutory Fund policyholders who accepted Government’s 2011 bailout offer. In addition, all non-assenting third party resident and non-resident STIP holders and holders of mutual fund contracts were invited to apply for full payment of their policies; payments to this group commenced on July 25, 2016. In addition, Government received 2 further payments in October 2016 and July 2017 totalling an additional $1.1 billion.

In May 2017, CLICO and the Government agreed the transfer of CLICO’s 100% shareholding in Occidental Investments Limited (OIL) and Oceanic Properties Limited (OPL) to the State Enterprise, Golden Grove - Buccoo Limited on the basis of an independent valuation and thereby appropriately reducing CLICO’s liabilities to Government.

PAYMENT SYSTEMS OVERSIGHTPrinciples for Financial Market Infrastructures (PFMI) AssessmentsThe Central Bank completed oversight assessments of the Real Time Gross Settlement System (RTGS), the Automated Clearing House (ACH), the cheque clearing system and the Automated Teller Machine (ATM)/ Point of Sale (POS) systems for debit cards, using the CPSS-IOSCO Principles for Financial Market Infrastructures (PFMI). The initial baseline assessments were presented and discussed with each of the operators. The information received would be used to finalize reports for each system. A consolidated report on all systems would be published in 2018.

5. De-risking refers to the phenomenon of f inancial institutions terminating or restricting Correspondent Banking Relationships (CBRs) with clients or categories of clients to avoid, rather than manage, risk in line with the U.S. FATF’s (Financial Action Task Force) guidelines.

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PAYMENTSYSTEM

CONSUMERPROTECTION

CYBER SECURITY

AML / CFT MONETARY POLICY / FINANCIAL STABILITY

Developments in Payments SystemsDuring 2017, there was a noted increase in the number of expressions of interest by entities wishing to be part of the payments space. Twelve expressions of interest were received by the Central Bank by persons wishing to offer e-money, virtual currencies and other payment services. A number of new products /services were also approved during the period. Additionally, the Central Bank issued a Public Notice on the 29th & 30th September 2017 advising the public on the guidelines related to Payment Service Providers to ensure that persons wishing to offer these services approach the Central Bank for registration.

The Central Bank has been receiving requests from market participants wishing to engage in virtual currencies and other e-payments. Given the emergence of these fintechs and cryptocurrencies on the financial landscape, the Central Bank has developed a discussion draft Virtual Currency paper to inform a way forward for the treatment of cryptocurrencies. This Policy is currently under internal review.

Money Remittance PolicyThe Central Bank also developed a first draft of a Money Remitters Policy, which proposes a regulatory framework for money remitters that treats with AML/CFT risks, payment and settlement risks and consumer protection issues. The draft policy is being finalized for consultation with stakeholders early in the 2017/18 fiscal year.

Payments System CouncilThe Central Bank chairs and acts as the secretariat to the Payments System Council (PSC)6. The PSC continued to execute the work under its five-year strategic plan towards enhancing the transactional efficiency and effectiveness of national payments system. Consequently, attention was paid to developments in e-money, virtual currencies and distributed ledger technology. The PSC also focused on developing a communication strategy to raise public awareness on payment systems issues and promote the adoption of modern electronic payment options.

ADVANCING THE LEGISLATION FOR SUPERVISION

16The Central Bank continued to champion the passage of the Insurance Bill. A Joint Select Committee of Parliament (JSC) was established in February 2017 to consider andreport on the Insurance Bill, 2016. A team from the Central Bank appeared before the JSC who elicited the team’s views on positions taken by various stakeholders. The JSC’s Report was subsequently laid in Parliament in August 2017 and contains a consolidated version of the Insurance Bill, 2016 with recommended amendments.

Credit UnionsIn August 2017, the Central Bank with the assistance of CARTAC engaged in an exercise to assess the implications of the Credit Union sector on financial stability; the current legislative framework and applicable policy.

6. More information on the PSC is available at

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I N T E R N A L O P E R A T I O N S

GOVERNANCE AND THE CONTROL ENVIRONMENTThe Bank continued to ensure a systematic and comprehensive approach to risk management by establishing an Enterprise Risk Management (ERM) framework and improving operational efficiencies and reporting in the Bank as a whole. The fourth Bank-wide Risk and the annual Security assessment were completed. A monthly Compliance Report for Senior Management was introduced which shares the Bank’s compliance status and indicates the actions to be taken to meet upcoming compliance obligations. The collation and review of the Bank’s policies was also completed, and allowed the formulation of a Policy Governance Framework which provides guidance on how the Bank’s policies are to be formulated, approved and reviewed. The Bank’s Anti-Fraud Framework was documented and the policies related to fraud were collated. In the area of Business Continuity, the second financial sector business continuity assessment was completed by the commercial banks, the Trinidad and Tobago Security and Exchange Commission and the Ministry of Finance. The results showed that the sector’s business continuity arrangements are in place.

In support of enhancing internal control efforts, the Internal Audit Department provided comprehensive assurance over the control frameworks that manage key risks to ensure that a robust control environment exists at the Bank. Thus, thematic audits were undertaken in the areas of Human Resources & Industrial Relations, Information Technology, Finance & Accounting, Procurement and Corporate Social Responsibility.

The Security Department completed phase two of the Integrated Security Management System (ISMS), the upgrade of the Access Control and the CCTV components, thus facilitating an improvement of the Bank’s security arrangements and enhancing operational efficiency.

Security of the Bank‘s critical documents both physical and electronic is very important. In the current environment, cyber security has become

a focal point of international discussion and risk management. The Bank’s initiatives in this regard include the review of existing arrangements for access to secure areas such as the Banking Operations Department and strengthening the security of the electronic processing environment. Therefore, in 2017 the Bank adopted the standards outlined in the Society for Worldwide Interbank Financial Telecommunications (SWIFT) in its Customer Security Programme (CSP).

A comprehensive review of the Bank’s procurement policies, processes and procedures was carried out and a standing Tenders Committee was established. A review of the Bank’s Contract Management Policy and Procedures was completed and a Policy Governance Framework was developed.

HUMAN RESOURCESAs at September 30, 2017, the Bank recorded a manpower figure of 588 staff – 554 permanent and 34 contract staff. This figure represents a 4 per cent decrease in overall manpower over the last period. During the 2016/17 period, the Bank recruited 18 persons (3 permanent and 15 contract) as the focus was on filling only the gaps considered strategic and/or critical.

During the period, 31 employees (5.3 per cent of staff) were promoted, including 2 staff members into the management stream. There were 44 separations. The Bank implemented its 2016/17 Training and Development Plan and staff members were exposed to both technical and non-technical training. Over 50 per cent of staff participated in in-house, local and overseas training, which represented an average of 22.6 training hours per employee.

Following extensive review of local and international experience and best practices, a Whistle-Blowing Policy was implemented on April 1, 2017. The policy is intended to complement existing processes and feedback mechanisms and provide a further channel for enhancing transparency, integrity and good governance in the Central Bank.

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ECONOMIC RESEARCH AND STATISTICAL SERVICESDuring FY 2016/17 the Bank continued to provide intelligence on the Trinidad and Tobago economy as the country adjusted to its changed economic circumstances. Information on economic developments and explanations of monetary and financial policies were disseminated through the Bank’s Annual Economic Survey, Economic Bulletin, and the Monetary Policy and Financial Stability Reports. In addition, the Bank’s website through the data centre, continued to be a reliable source of statistics to students, analysts and policy makers on the numerous economic variables. Work on expanding the range of indicators on the website continues in the areas of private pension funds and payment system statistics.

One of the key achievements has been the migration of the financial account of the Balance of Payments to the Sixth Edition of the IMF’s Balance of Payments (BOP) and International Investment Position (IIP) Manual (BPM6) and the compilation of the IIP Statistics. These developments were undertaken with the assistance of the Caribbean Regional Technical Assistance Center (CARTAC) of the International Monetary Fund (IMF).

Given its responsibility for one of the main levers of macroeconomic management – monetary policy – the Bank was involved in several meetings with local and international agencies, and provided key support for the country’s engagement with the IMF and the credit rating agencies. In addition, collaboration continues with the Ministry of Finance on the Commonwealth Debt Recording and Management System (CSDRMS).

During the year the Research Department published working papers covering the areas of financial cycles, financial indicators and aging. However, the centrepiece of the Bank’s research activities was the relaunch of the Research Review Seminar in June 2017. The Seminar, which was oriented towards proposing solutions for the country’s present economic situation, featured work of the Research Department spanning a number of areas including: monetary and fiscal policy; the interest rate differential and capital outflows; macro prudential frameworks and virtual currencies. As in previous years, staff participated in research seminars hosted by regional institutions. During the year the internal Research Discussion series remained a popular forum for staff to elaborate and explore economic ideas and solutions.

HUMAN RESOURCE HIGHLIGHTS

5STAFF

MEMBERS

25REDUCTION IN RECRUITMENT

SEPARATIONS1

PROMOTIONS22

TRAINING HOURS

per employee

The Governor also met with all staff in Governor Outreach sessions where staff shared concerns and suggestions for improvements. The employee suggestion system was reintroduced and expanded to include retirees: 31 suggestions were received.

In the second half of 2016/17, revised managerial objectives for all managers were incorporated into the performance management system (PPMS) to strengthen

management accountability. A focus on risk/health and safety, as well as the management of the budget, contracts and procurement processes were included to ensure that these areas received the level of management attention considered necessary. The PPMS is expected to be further improved by integrating competencies.

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INFORMATION TECHNOLOGY AND KNOWLEDGE MANAGEMENTIn the area of Financial Technology and Information Security, focus this year was on increasing resiliency and efficiency of the Bank’s information systems whilst creating headroom for growth to accommodate strategic programmes. This was achieved through several infrastructural upgrades, expansion of network connectivity and the roll out of an Information Security programme.

Core systems were strengthened and fortified, internal controls were tightened and all members of staff were trained in identifying cyber threats. The department led the establishment of Cyber Information Sharing Groups amongst regional central banks and the local banking institutions. Information Security Policies were updated to reflect increasing use of wireless, paperless and mobile technology.

Whilst maintaining system availability at over 99 per cent, key infrastructural components were upgraded to lay the foundation for a modern and stable working environment. Network and communication links were upgraded for improved response times and increased resilience. The Bank’s PBX system was upgraded

from an analog to a digital infrastructure which added resiliency, improved operational efficiency and significantly reduced costs.

An electronic, paperless solution for senior management and Board meetings was implemented resulting in improved accessibility for participants and greater efficiency in the dissemination of meeting documents. Inter-departmental collaboration also resulted in an upgraded website.

Knowledge and Information Management focused on the management of the Bank’s records and information services, especially the identification and management of its vital records for business continuity and disaster recovery purposes. A review of the information services and resources provided to the Bank was also conducted; this was to ensure relevance to the Bank’s objectives.

Existing metrics for assessing and mitigating the risks associated with high priority records, documents and services were reviewed and additional metrics were developed where required. Operational procedures were reviewed and updated to mitigate any type of information risks. Evaluation and analysis continued on the establishment of a comprehensive information management solution.

FINANCIAL TECHNOLOGY AND INFORMATION TECHNOLOGY PERFORMANCE HIGHLIGHTS

Infrastructure Environment

Modernization of the Bank’s infrastructure

Revamped PBX with several cost cutting initiatives

Significant investments in the core network

Wireless infrastructure upgrades and improvements to support a mobile staff

Information SecurityUpdate to Information Security framework and policies

Introduction of mandatory information security training

Investments in multiple cybersecurity solutions to strengthen the environment

Business SolutionsUpgrade to the Bank’s website

Introduction of a paperless solution to support the Board/Executive meetings

Upgrades to several core business applications

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C O M M U N I T Y E N G A G E M E N T A N D O U T R E A C H

The Bank made significant strides in deepening its engagement with the public, media, external agencies, staff, retirees and special interest groups. This was done through several initiatives, including the update of the 2016/17 – 2020/21 Strategic Plan which was posted to the Bank’s website. A number of organisations benefitted through the Bank’s Corporate Social Responsibility (CSR), including the Trinidad and Tobago Chamber of Industry and Commerce (JumpStart Programme), San Fernando Sports Academy, the Just Because Foundation, the Voice of Lupus Foundation, Moms for Literacy, Heroes Foundation, Society for St. Vincent De Paul and Healing with Horses. In addition, the Bank also deepened relationships with other Central Banks – Banco de Moçambique, Eastern Caribbean Central Bank (ECCB) and Central Banke Van Suriname – via short-term attachments and visits during the year.

The Bank continues to work to widen its role in public financial education and financial affairs. Consistent with the calendar of events, the 2016/17 Monetary Policy and Financial Stability Reports were presented to the public though media presentations held at the Bank and via a live stream on the Bank’s website.

FINANCIAL SERVICESArising out of the strategic merger of the Office of Financial Services Ombudsman (OFSO) with the National Financial Literacy Programme (NFLP) in 2016, the approach to outreach sessions was restructured to include aspects of financial planning and complaints resolution. The NFLP rolled out eighty-three financial literacy sessions to 3,800 persons. Additionally, 900 persons were engaged at four expositions/fairs. To further increase awareness, a radio campaign was conducted in the final quarter of the financial year. A revised Quality Assurance Framework for NFLP was developed along with the operational procedures for implementation in an effort to improve the standard of service being provided to stakeholders.

The OFSO continued to fulfil its mandate of complaints resolution. A new Complaints Management System was developed internally in order to enhance analysis and reporting to stakeholders. This analysis would contribute to the design of financial literacy programmes.

A committee, chaired by the Financial Services Ombudsman, was convened with the aim of developing a national financial education strategy for Trinidad and Tobago. The committee comprises the Bankers Association of Trinidad and Tobago (BATT), Association of Trinidad and Tobago Insurance Companies (ATTIC), the Trinidad and Tobago Insurance Institute (TTII), the Financial Literacy Secretariat of the Tobago House of Assembly (FLS-THA), the Office of the Financial Services Ombudsman (OFSO) and the National Financial Literacy Programme (NFLP).

The OFSO/NFLP was engaged as a stakeholder partner in the Ministry of Labour and Small Enterprise Development’s Workforce Development Plan. This Cabinet approved venture focuses on support services to retrenched and unemployed persons.

1 / Governor Dr. Alvin Hilaire, Mr. Alister Noel and Deputy Governor Dr. Sandra Sookram (left to right) at the launch of the 2016 Monetary Policy Report

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MEMORIAL LECTURESThe Central Bank hosted major lectures that honour the memory and legacy of two of Trinidad and Tobago’s distinguished sons: Dr. Eric Williams and Dr. Rudranath Capildeo. Our flagship annual lecture celebrates the life and work of the country’s first Prime Minister and his achievements as a ground-breaking historian, national and Caribbean leader. The 31st Lecture in the series was given on September 22, 2017 by Dr. Cary Fraser, Guyana-born scholar and lecturer in history and international relations. The theme of Dr. Fraser’s lecture was “Chaguaramas and Caribbean Identity: Exploring the Diplomatic Legacy of Eric Williams.”

1 / Governor Dr. Alvin Hilaire, Ms. Amrita Gosine, Mr. Dominic Stoddard, Ms. Sharon Villafana and Mr. Barnaby Dicks (De La Rue) (left to right) at the Know Your Money series 1. Banco de Moçambique Delegation with Governor, Dr. Alvin Hilaire (centre) 2 / Dr. Cary Fraser – 31st Dr. Eric Williams Memorial Lecture. 3 / Dr. Anil Kokaram – 4th Annual Rudranath Capildeo Lectureat the launch of the 2016 Financial Stability Report.

The fourth edition of the lecture dedicated to the memory of Dr. Capildeo––a brilliant, internationally renowned scientist and the first Opposition Leader of an independent Trinidad and Tobago––was held on July 7, 2017 with son of the soil and Academy Award winner, Dr. Anil Kokaram as feature speaker. Dr. Kokaram, a pioneer in digital video processing used in motion pictures, delivered an illuminating presentation on the topic, “Understanding the Technology of Digital Video and Its Impact on Everyday Life.”

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MONEY MUSEUMFor FY 2016/17, the Museum staff hosted public visits from 448 persons, consisting of 41 adults and 407 students. The Money Museum held successful outreach programmes at the Divali Nagar 2016 and Emancipation Village 2017. Exhibits included early forms of money, commemorative notes and coins, and notes and coins used in the colonial era. Visitors learned about the history and development of currency in Trinidad and Tobago, as well as the role and functions of the Central Bank. The work on the upgrade of the Museum continued during this period.

As part of our contribution to cultural development, the Bank hosted its annual calypso mini-concert (“Vintage”) to celebrate Calypso History Month in October 2016. This is an annual event hosted in conjunction with the Trinbago Unified Calypsonians Organisation (TUCO). On Carnival Friday 2017, the Bank held “Rhythms on the Plaza,” its annual Carnival gift to the wider community, and featured young, upcoming band, Mayaro The Band.

1 | Mrs. Adlene Joseph-Martinez at Museum Outreach, Divali Nagar. 2 | Museum Outreach display. 3 | Young calypsonians at “vintage” concert for TUCO Calypso History Month.

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1 | Ms. Salina Scott – CariFin Games 2017. 2 | Governor Dr. Alvin Hilaire and Ms. Karyn Stewart at CariFin Family Day. 3 | 2017 De La Rue Scholarship Awardees. 4 | Vacation Interns 2017. 5 | VIP Mentor at Graduation Ceremony.

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SPORTS AND CULTURAL CLUBThe Central Bank Sports and Cultural Club, (CBSCC) had a successful year for the period2016/17 including hosting a new event, “Parang Under the Stars” in December 2016. This was followed by the annual All Inclusive in February 2017. The staff Calypso and Ole Mas Competition was held on February 23, 2017. CBSCC supported all the disciplines that fall under its purview, and also introduced 2 new clubs: the Art Club and the Collectors Club.

The CBSCC also supported the Bank’s participation in the CariFin Games – a series of sporting events that promotes good health and camaraderie within the financial community. The Bank’s team secured top spots in various categories of the Games, including capturing the Governor’s challenge for the second year in a row. Our 2017 Ms. CariFin candidate, Mrs. Salina Scott, captured the first place in all the women’s track and field events.

DE LA RUE CURRENCY SCHOLARSHIP PROGRAMMEME2016/17 marked the 13th anniversary of the De La Rue Scholarship, a joint initiative of the Bank with De La Rue of the UK. For the first time since inception, applications were open to candidates from a much wider range of disciplines. Two persons were awarded scholarships for the 2016/17 period – Ms. Tammy Williams and Mr. Clarence Ramai. Currently, 7 of the past scholarship recipients are employed by the Bank.

VACATION INTERNSHIP PROGRAMMEMEThe Bank continued to engage in its annual corporate social responsibility initiatives – the Vacation Internship Programme (VIP) and the De La Rue Scholarship. This year the Bank hosted 26 Interns who were exposed to on-the-job training and various programmes to assist with the transition from university to the world of work.

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AND WELLNESSThe Bank’s Employee Assistance Programme continued to play an important role in our employee wellness/welfare strategy. A Peer Support initiative was launched where staff members who volunteered were trained in basic techniques in supporting colleagues experiencing minor difficulties. Additionally, a Wellness Week was hosted for staff and included a wide range of lectures on critical health issues.

The staff charity programme, We Care, embarked on several initiatives in support of organisations and families. These included an Urgent Needs initiative that provided assistance to 2 children’s homes and 1 family and a Back to School Drive that supported 11 primary schools. The children received school bags with supplies which were donated by staff. We Care also led a Bank-wide staff drive to collect coins of all denominations as part of the Bank’s elimination of the 1¢ coin. The contributions will go towards a financial donation to testing kits and other supplies for the Diabetes Association of Trinidad and Tobago.

1 | We Care Back to School - Moriah Donation. 2 | CBSCC ‘Ole Mas’ Competition Winners. 3 | External Relations Wellness Fair. 4 | CBTT Coin Campaign 2017.

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A U D I T O R G E N E R A L

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F I N A N C I A L S T A T E M E N T S

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ASSETS NotesSep-17$’000

RestatedSep-16$’000


Foreign currency assets

Foreign currency cash and cash equivalents 4 29,338,210 38,740,864 36,998,052

Foreign currency investment securities 5,7 25,746,397 25,923,905 26,374,730

Foreign receivables 9 5,079,386 4,271,434 3,759,555

Subscriptions to international financial institutions 10 5,299,633 5,294,542 3,837,933

International Monetary Fund - Holdings of Special Drawing Rights

2,267,737 2,268,011 2,461,370

67,731,363 76,498,756 73,431,640

Local currency assets

Local currency cash and cash equivalents 4 1,049,182 1,666,802 1,709,615

Local currency investment securities 5,6,7 220,540 223,991 4,489,648

Retirement benefit asset 8 106,961 121,548 179,540

Accounts receivable and prepaid expenses 9 2,208,147 2,235,540 2,175,869

Other assets 11 174,558 180,936 227,979

Property, plant and equipment 12 176,154 194,221 217,328

3,935,542 4,623,038 8,999,979

TOTAL ASSETS 71,666,905 81,121,794 82,431,619

LIABILITIES

Foreign currency liabilities

Demand liabilities - foreign 13 789,699 603,878 433,325

International Monetary Fund - Allocation of Special Drawing Rights

3,006,741 3,006,769 2,866,201

Accounts payable 14 5,307,295 4,778,682 3,894,425

9,103,735 8,389,329 7,193,951

Local currency liabilities

Demand liabilities - local 13,28 26,489,350 33,374,830 30,301,751

Accounts payable 14 27,425,237 31,170,432 40,292,357

Provision for transfer of surplus to government 1,046,636 714,026 809,011

Provisions 15,28 6,001,676 5,872,606 2,233,378

60,962,899 71,131,894 73,636,497

CAPITAL AND RESERVES

Capital 23 800,000 800,000 800,000

General reserve 800,000 800,000 800,000

Retained earnings 271 571 1,171

1,600,271 1,600,571 1,601,171

TOTAL LIABILITIES, CAPITAL AND RESERVES 71,666,905 81,121,794 82,431,619TOTAL LIABILITIES, CAPITAL AND RESERVES 71,666,905 81,121,794

CENTRAL BANK OF TRINIDAD AND TOBAGOCONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

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NotesSep-17$’000


Income from foreign currency assets

Investment income 16, 28 731,174 562,251

Investment expense (27,492) (26,363)

703,682 535,888

Loss from currency translations (101,518) (36,409)

Net loss realised on disposal and amortisation of investments 16 (138,986) (312,013)

463,178 187,466

Income from local currency assets

Interest income 17 1,003,997 971,209

Rental income 2,192 2,302

Other income 17, 28 63,932 63,391

1,070,121 1,036,902

Decrease in provisions 6,789 57,383

Total income 1,540,088 1,281,751

Operating expenses

Printing of notes and minting of coins 18 52,305 81,454

Salaries and related expenses 19 253,316 288,911

Interest paid 78,303 76,519

Directors' fees 1,168 1,128

Depreciation 28,417 34,286

Other operating expenses 20 80,243 86,027

Total operating expenses 493,752 568,325

Net surplus for the period 1,046,336 713,426

Total comprehensive income for the period 1,046,336 713,426

CENTRAL BANK OF TRINIDAD AND TOBAGO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

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CENTRAL BANK OF TRINIDAD AND TOBAGO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

CENTRAL BANK OF TRINIDAD AND TOBAGO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

Issued and Fully Paid Up Capital

General Reserves

Retained Earnings Total

$'000 $'000 $'000 $'000

Balance as at 1st October 2015 800,000 800,000 1,171 1,601,171

Net surplus for the period - - 713,426 713,426

Transfer of surplus to Consolidated Fund - - (714,026) (714,026)

Balance as at 30th September 2016 800,000 800,000 571 1,600,571

Balance as at 1st October 2016 800,000 800,000 571 1,600,571

Net surplus for the period - - 1,046,336 1,046,336

Transfer of surplus to Consolidated Fund - - (1,046,636) (1,046,636)

-

Balance as at 30th September 2017 800,000 800,000 271 1,600,271

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CENTRAL BANK OF TRINIDAD AND TOBAGO CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

NotesSep-17$’000



Cash flows from operating activities

Net surplus for the year before taxation 1,046,336 713,426 699,732

Adjustments for:

Depreciation 28,417 34,286 35,317

Net loss on disposal of fixed assets 98 (277) (622)

Interest income (1,719,513) (1,531,879) (1,327,156)

Interest expense 78,303 76,519 80,007

Dividend income (1,667) (1,581) (1,534)

Provisions (6,789) (57,383) (159,251)

Revaluation of Artwork (816) - -

Cash outflow before changes in operating assets and liabilities (575,631) (766,889) (673,507)

Changes in operating assets and liabilities

(Increase)/decrease in accounts receivable & prepaid expenses (761,320) (554,794) 2,202,018

(Increase)/decrease in other assets (6,016) 34,890 21,987

Decrease in pension asset 14,587 57,992 96,709

(Decrease)/increase in accounts payable and other liabilities (9,920,068) (4,985,001) 4,907,966

Net cash flow (used in)/from operations (11,248,448) (6,213,802) 6,555,173

Cash flows from investing activities

Purchase of property, plant and equipment (9,652) (12,019) (32,700)

Proceeds from sale of property, plant and equipment 20 1,117 848

Net proceeds from sale/(purchase of) investments 428,347 5,356,624 (5,035,655)

Net repayment/(issue) of loans and advances 35,968 (12,108) 95,143

Interest received 1,700,274 1,514,763 1,391,435

Dividends received 1,667 1,581 1,534

Interest paid (81,923) (85,800) (90,771)

Net decrease/(increase) in International Monetary Fund Holding of Special Drawing Rights and Allocation account

246 333,927 (32,352)

Payment to Consolidated Fund (714,026) (809,013) (177,364)

Net cash flow from/(used in) investing activities 1,360,921 6,289,072 (3,879,882)

Cash flows from financing activities

Lease payment 12,394 12,152 11,913

Net cash flow from financing activities 12,394 12,152 11,913

Net (decrease)/ increase in cash and cash equivalents (9,875,133) 87,422 2,687,204

Foreign currency differences in monetary assets & liabilities (145,141) 1,612,577 312,849

Cash and cash equivalents, beginning of period 4 40,407,666 38,707,667 35,707,614

Cash and cash equivalents, end of period 4 30,387,392 40,407,666 38,707,667

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CENTRAL BANK OF TRINIDAD AND TOBAGONOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 September 2017 (Expressed In Trinidad & Tobago Dollars)

1

The Central Bank of Trinidad and Tobago (the Bank) was established as a corporate body in 1964 under the Central Bank Act (Chapter 79:02). The principal office is located at Eric Williams Plaza, Independence Square, Port of Spain, Trinidad and Tobago.

The Central Bank Act entrusts the Bank with a range of responsibilities, among which is the promotion of monetary, credit and exchange conditions most favourable to the development of the economy of Trinidad and Tobago.

The Bank has the exclusive right to issue and redeem currency notes and coins in Trinidad and Tobago, and is empowered, inter alia, to act as banker for, and render economic, financial and monetary advice to the Government of the Republic of Trinidad and Tobago (GORTT) and open accounts for and accept deposits from the Central Government, Local Government, statutory bodies, commercial banks and other financial institutions. It also has the authority to make advances, purchase and sell discounted bills of exchange and promissory notes on behalf of the above named institutions, and to purchase and sell foreign currencies and securities of other Governments and international financial institutions.

The Bank is also responsible for protecting the external value of the currency, managing the country’s external reserves and taking steps to preserve financial stability.

2

The principal accounting policies applied in the preparation of the Financial Statements are set out below. These policies have been applied to all of the years presented.

a. Basis of preparation

These Financial Statements have been prepared on the historical cost basis except as modified by the revaluation of “artwork” and “available-for-sale” and “fair value through profit or loss” financial assets.

These Financial Statements have been prepared in accordance with the Central Bank Act (Chapter 79:02). The Bank has chosen to adopt the recognition and measurement requirements of the International Financial Reporting Standards (IFRS) together with the presentation and disclosure framework in the preparation of these Financial Statements insofar as the Bank considers it appropriate to do so having regard to its functions.

These Financial Statements depart from the IFRS because of the nature of the Bank, including its role in the development of the financial infrastructure of the country as well as the regulations by which it is governed. The IFRS which have not been fully adopted are:

• IAS 21 – The Effect of Changes in Foreign Exchange Rates, requires that all unrealised gains and losses be accounted for through the Income Statement. The Central Bank Act requires that the profit for the year be transferred to the Consolidated Fund but does not distinguish between

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realised and unrealised profits. As such the Bank accounts for all unrealised gains and losses on Changes in Exchange Rates through a Provision for Foreign Currency Exchange Rate Reserves.

• IAS 37 – Provisions, Contingent Liabilities and Contingent Assets, defines Provisions as liabilities of uncertain timing or amount. The Central Bank Act imposes specific limitations on the scope of the Bank to create reserves and so prepare for certain unforeseen events. The Bank has therefore established Provisions for specific types of transactions and obligations, which would more typically be reflected as various types of reserves under the IFRS. See Note 15.

• IAS 39 – Financial Instruments: Recognition and Measurement, requires that where an asset is classified as available-for-sale, the unrealised gains or losses on fair value movements should be recognised directly in Capital and Reserves through the Statement of Changes in Equity. The Central Bank Act imposes specific limitation on the scope of the Bank to create reserves. Therefore the Bank recognises its unrealized gains or losses on the available-for-sale investments under “Provisions” rather than “Reserves”.

• IFRS 7 – Financial Instruments Disclosures,

requires that an entity discloses very detailed information on its investments including information on concentration of risk on investments; geographical information on investments and sensitivity analysis for each type of market risk. The Bank’s investment of the country’s reserves is managed under strict governance procedures and the Central Bank Act requires that the Bank maintain a prudential level of confidentiality.

The accounting treatment adopted for each of these departures is defined in the accounting policies and notes below. The impact of this is reflected in the improved

stability in the operations of the Bank. Management considers that these Financial Statements fairly represent the Bank’s financial position, financial performance and cash flows.

b. Changes in accounting policies and disclosures

i. New standards and interpretations that are not yet effective and have not been early adopted by the Bank

There are new standards and amendments to standards and interpretations that are not yet effective for accounting periods beginning on or after January 1 2017 and have not been early adopted by the Bank. The Bank intends to adopt these standards and interpretations, if applicable, when they become effective.

The Bank is currently assessing the impact of adopting these new standards and interpretations. Some of these by nature are not expected to have a significant effect on the Bank’s financial statements. However, the impact of adoption depends on the assets and liabilities held by the Bank at the date of adoption; therefore it is not practical to quantify the effect at this time. These standards and amendments include:

• IFRS 9 – Financial Instruments: Classification and Measurement (effective January 1, 2018)

IFRS 9 which introduces new requirements

for classifying and measuring financial assets will eventually replace IAS 39 - Financial Instruments: Recognition and Measurements. The classification of financial assets will depend on the Bank’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. The Bank is in the process of assessing IFRS 9’s full impact.

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• IFRS 15 – Revenue and Contracts with Customers (effective January 1, 2018)

The new standard applies to revenue from contracts with customers and will replace all of the revenue standards and interpretations in IFRS, including IAS 18 – Revenue. This standard provides a single, principles based five-step model to be applied to all contracts with customers. The five steps in the model are as follows:

- Identify the contract with the customer

- Identify the performance obligations in the contract

- Determine the transaction price - Allocate the transaction price to

the performance obligations in the contract

- Recognize revenue when (or as) the entity satisfies a performance obligation

The Bank will assess the impact of this Standard.

• IFRS 16 – Leases (effective January 1, 2019)

This new standard was issued in January 2016 and applies to annual reporting periods beginning on or after 1 January 2019. This standard establishes principles for the recognition, measurement, presentation and disclosure of leases. IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or

the underlying assets has a low value. IFRS 16’s approach to lessor accounting will not change substantially, lessors will continue to classify leases as either operating or finance.

This standard will replace the following standards and interpretations:

- IAS 17 – Leases - IFRIC 4 – Determining whether an

Arrangement contains a Lease - SIC – 15 – Operating Leases

– Incentives - SIC – 27 – Evaluating the Substance

of Transactions Involving the Legal Form of a Lease

Early adoption of this standard is permitted only if IFRS 15 – Revenue from Contracts with Customers has also been adopted. The Bank will assess the impact of this Standard but does not expect to choose early adoption.

• IAS 7 – Statement of Cash Flows (amendment effective January 1 2017)

This amendment intends to improve

information provided to the users of the financial statements regarding the entity’s financing activities. To achieve this objective, the entity will be required to disclose changes in liabilities arising from the following financing activities:

- Changes from financing cash flows - The effect of changes in foreign

exchange rates - Changes in fair values - Other change

To fulfil the new disclosure requirement, the entity must provide reconciliation between the opening and closing balances in the statement of financial position for liabilities arising from financing activities. Furthermore, changes in liabilities arising from financing activities must be disclosed separately from changes in other assets and liabilities.

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(cont'd)b. Changes in accounting policies and disclosures (cont'd)

i. New standards and interpretations that are not yet effective and have not been early adopted by the Bank (cont'd)

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IAS 7 amendment becomes mandatory for annual periods beginning on or after 1 January 2017. The Bank will assess the impact of this amendment.

ii New standards and interpretations that are not yet effective and are not applicable to the Bank.

• IAS 12 - Income Taxes (amendment effective January 1 2017)

This amendment was issued on 19 January 2016 and it serves to clarify the following aspects with regards to Recognition of Deferred Tax Assets for Unrealized Losses: - Unrealised losses on debt instruments

measured at fair value and measured at cost for tax purposes give rise to a deductible temporary difference regardless of whether the debt instrument’s holder expects to recover the carrying amount of the debt instrument by sale or by use.

- The carrying amount of an asset does not limit the estimation of probable future taxable profits

- Estimates for future taxable profits exclude tax deductions resulting from the reversal of deductible temporary difference

- An entity assesses a deferred tax asset in combination with other deferred tax assets. Where tax law restricts the utilization of tax losses, an entity would assess a deferred tax asset in combination with other deferred tax assets of the same type.

This amendment is not applicable to the Bank (refer to note 2q).

• IAS 40 – Investment Property (amendment effective January 1 2018)

This amendment serves to clarify the

application of paragraph 57 of IAS 40. Paragraph 57 has been amended to state that an entity shall transfer

a property to, or from, investment property when, and only when, there is evidence of a change in use. A change in management’s intentions for the use of a property by itself does not constitute evidence of a change in use. The list of evidence in paragraph 57 (a) – (d) was designated as non-exhaustive list of examples instead of the previous exhaustive list.

This amendment is not applicable to the Bank.

c. Consolidation

The Consolidated Financial Statements comprise the financial statements of the Bank and its subsidiary for the year ended 30 September 2017. The financial statements of the Bank’s subsidiary are prepared for the same reporting year as the Bank, using consistent accounting policies. All intra-group balances, transactions, income and expenses are eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Bank. Control is achieved where the Bank has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Non-controlling interests represent the portion of profit or loss and net assets of subsidiaries not owned, directly or indirectly, by the Bank. Currently, there are no non-controlling interests as the subsidiary being consolidated is owned 100 per cent by the Bank.

Section 36(g) of the Central Bank Act empowers the Bank, with the approval of the Minister of Finance, to acquire, hold and sell shares or other securities of any statutory body or company registered under the Companies Act for the purpose of promoting the development of a money or securities market or for financing the economic development of Trinidad and Tobago. The Bank has interests in a

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number of institutions – the Trinidad and Tobago Unit Trust Corporation, the Deposit Insurance Corporation, Caribbean Credit Rating and Information Agency, Inter-bank Payments System Limited, CB Services Limited, and the Office of the Financial Services Ombudsman.

In all but the Deposit Insurance Corporation and CB Services Limited, the Bank has a minority financial interest, in fulfilment of the Bank’s role to help promote the development of the country’s financial infrastructure. The Deposit Insurance Corporation was established for the protection of depositors in the domestic financial system. While the share capital was paid up by the Bank, the Deposit Insurance Corporation was always conceived to be a separate and independent institution with its own mandate and operates as such. The Financial Statements of these related enterprises, with the exception of CB Services Limited, have not been consolidated with those of the Bank.

Extracts of the Parent’s Financial Statements are included in Note 29.

d. Foreign currency translation

i. Functional and Presentation CurrencyThe Financial Statements are presented in Trinidad and Tobago dollars, which is the Bank’s functional and presentation currency.

ii. Transactions and balancesMonetary assets and liabilities denominated in foreign currencies are translated into Trinidad and Tobago dollars at the rates of exchange prevailing at the close of business at the Statement of Financial Position date.

2

(cont'd)c. Consolidation (cont'd)

Translation gains or losses, at year end exchange rates of these monetary and non-monetary assets and liabilities, are recognised in Provisions – Foreign currency exchange rate reserves.

Foreign currency transactions are translated at the exchange rates prevailing on the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the Statement of Comprehensive Income.

iii. Special Drawing RightsTransactions with the International Monetary Fund (IMF) are recorded at the local currency equivalent of Special Drawing Rights using rates notified by the IMF. Special Drawing Rights (SDR) are defined in terms of a basket of currencies. To revalue the Bank’s holdings of SDRs, the value of the SDR was calculated as a weighted sum of the exchange rates of five major currencies (the US dollar, euro, Japanese yen, pound sterling and the Chinese renminbi) against the Trinidad and Tobago dollar. The TT: SDR rate as at 30 September 2017 was 0.106805.

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e. Critical accounting estimates and judgments

The Bank makes estimates and assumptions that affect the reported amounts of the assets and liabilities within the financial year. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events.

The resulting accounting estimates will seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are illustrated below:

i. Estimated pension andpost–employment medical planThe estimate of the pension and post-employment medical plan obligations, in relation to the defined benefit plans operated by the Bank on behalf of its employees, are primarily based on the estimation of independent qualified actuaries. The value of the obligations is affected by the actuarial assumptions used in deriving the estimate.

ii. Provision for bad and doubtful debtsPursuant to Section 35(4) of the Act, provisions are made for bad and doubtful debts in the accounts. In this regard, the relevant assets are shown in the Statement of Financial Position net of the amount which, in the opinion of the Bank, requires a specific provision.

iii. Fair value of f inancial instrumentsWhere the fair value of financial assets and financial liabilities recorded on the statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but where observable market data are not available, judgment

is required to establish fair values. The judgments include considerations of liquidity and model inputs such as volatility for longer dated derivatives and discount rates, prepayment rates and default rate assumptions for asset backed securities.

iv. Estimated replacement value of artworkThe estimated replacement value of artwork was primarily based on the valuation of an independent art consultant. The estimated market value is established based on the valuation report of the condition of the artwork.

f. Cash and cash equivalents

For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise balances with less than or equal to three months to maturity from the date of acquisition. It consists of cash, balances with other banks, short term funds and highly liquid investments, including fixed deposits and reverse repurchases.

g. Investment securities

The classification of financial instruments at initial recognition depends on the purpose and management’s intention for which the financial instruments were acquired and their characteristics. All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and financial liabilities which are recorded at fair value through profit or loss.

The Bank classifies its investment securities in the following four categories: “Held to maturity”, “Available-for-sale”, “Loans and advances” and “Fair value through profit or loss”.

i. Held to maturityInvestments classified as held to maturity are non-derivative financial assets with

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fixed or determinable payments and fixed maturity that the Bank’s management has the positive intention and ability to hold to maturity. After initial measurement, held to maturity financial investments are subsequently measured at amortised cost using the effective interest rate method (EIR) less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees that are an integral part of the effective interest rate. Interest on these investments is recognised in the Statement of Comprehensive Income.

ii. Available-for-saleThese investments are intended to be held for an indefinite period of time, and may be sold in response to needs for liquidity or to meet the goals of the strategic asset allocation approved by the Board.

They are initially recognised at fair value, (which includes transaction costs), and are subsequently re-measured at fair market value. Unrealised gains and losses on these investments are recognised in Provisions – Revaluation reserve at market value. Regular purchases and sales of financial assets are recognised on the trade date, which is the date on which the Bank commits to purchase or sell the asset.

When the securities are disposed of, the related accumulated fair value adjustments are included in the Statement of Comprehensive Income as realised gains and losses from investment securities.

The Bank has investments in several related companies which are accounted for as available-for-sale investments (see Note 6). None of these equity investments have a quoted market price in an active market

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(cont'd)

g. Investment securities (cont'd)i. Held to maturity (cont'd)

and therefore their fair value cannot be reliably measured. The cost of these equity investments is therefore considered a reasonable approximation of fair value.

iii. Loans and advancesLoans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Bank provides money or services directly to a counterparty, with no intention of trading the receivable and are carried at their expected realisable value, less any provision for impairment. Interest arrears are accrued and provided for in the current financial period. Determination of allowances for losses is based on an annual appraisal of each loan or advance.

Specific provisions are made when, in the opinion of management, credit risk or other factors make full recovery doubtful. Provisions created, including increases and decreases, are recognised in the Statement of Comprehensive Income.

iv. Fair value through profit or lossFinancial assets at fair value through profit or loss may only be made if the financial asset either contains an embedded derivative or will be managed on a fair value basis in accordance with a documented risk management strategy, or if designating it (and any financial liability) at fair value will reduce an accounting mismatch.

Derivatives are initially recognised in the Statement of Financial Position at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, or valuation techniques, as appropriate. The best evidence of the fair value of a derivative at initial recognition is the transaction price (i.e., the fair value of the consideration given or received).

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A derivative is a financial instrument or other contract within the scope of IAS 39 with all three of the following characteristics:

a. its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’);

b. it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and

c. it is settled at a future date.

h. Recognition and derecognition of f inancial instruments

The Bank uses trade date accounting when recording financial asset transactions. Financial assets are derecognised when the contractual right to receive the cash flows from these assets has ceased to exist or the assets have been transferred and substantially all the risks and rewards of ownership of the assets are also transferred. Financial liabilities are derecognised when they have been redeemed or otherwise extinguished.

i. Impairment of f inancial assets

The Bank assesses at each statement of financial position date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets

is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, the probability that they will enter bankruptcy or other financial reorganisation, default or delinquency in interest or principal payments and where observable data indicates that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

i. Financial assets carried at amortised costIf there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of ‘Interest income’. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Bank. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the

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previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write–off is later recovered, the recovery is credited to the Statement of Comprehensive Income.

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (EIR). If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR. If the Bank has reclassified trading assets to loans and advances, the discount rate for measuring any impairment loss is the new EIR determined at the reclassification date.

ii. Available-for-sale f inancial investmentsFor available-for-sale financial investments, the Bank assesses at each statement of financial position date whether there is objective evidence that an investment is impaired.

In the case of debt instruments classified as available-for-sale, the Bank assesses individually whether there is objective evidence of impairment based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of ‘Interest and other income’.

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(cont'd)i. Impairment of f inancialassets (cont'd)i. Financial assets carried at amortised cost (cont'd)

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to a credit event occurring after the impairment loss was recognised in the income statement, the impairment loss is reversed through the income statement.

In the case of equity investments classified as available-for-sale, objective evidence would also include a ‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement – is removed from equity and recognised in the income statement. Impairment losses on equity investments are not reversed through the income statement; increases in the fair value after impairment are recognised in Provisions – Revaluation reserve at market value.

j. Fair value measurement

The Bank measures certain financial instruments at fair value at each reporting date. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value measurement is based on the presumption that the orderly sale of asset or transfer of liability takes place in the principal market for the asset or liability. In the absence of a principal market, the most advantageous market for the asset or liability is used as the basis for fair value measurement.

The fair value estimate of an asset or liability is based on the assumptions that market participants would use when pricing the asset or liability, assuming the market participants act in their best economic interest.

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The fair value for financial instruments traded in active markets at the reporting date is based on their quoted price. For all other financial instruments not traded in an active market, the fair value is determined by using valuation techniques considered to be appropriate in the circumstances for which sufficient data is available and for which the use of relevant observable inputs are maximised. Valuation techniques include the market approach, the cost approach and the income approach.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the 3 levels of the fair value hierarchy based on the lowest level input that is significant to the entire fair value measurement. The levels of the fair value hierarchy are:

Level 1 – Quoted (unadjusted) market prices in active markets for identical assets of liabilities

Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Level 3 – Valuation technique for which the lowest level input that is significant to the fair value measurement is unobservable

Further details on fair value measurement are included in Note 7.

k. Offsetting f inancial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

l. Employee benef its

i. Pension benefitsThe Bank operates a Defined Benefit Plan (Plan) for all its eligible employees. The assets of the Plan are held in a separate trustee administered plan.

A Defined Benefit Plan is a pension plan that defines the amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The pension benefit is based on the final salary of the employee.

An asset or liability recognised in the Statement of Financial Position in respect of the Plan is the present value of the defined benefit obligation at the Statement of Financial Position date less the fair value of the Plan’s assets.

The Plan’s accounting costs are assessed on the basis of the Projected Unit Credit Method. A valuation is done every three years by independent actuaries. The last triennial valuation was performed as at 30 September, 2014 and the next valuation would be performed as at 30 September 2017.This is expected to be completed in the next financial year.

In accordance with the advice of the actuaries, the Plan’s costs of providing pensions are charged to the Statement of Comprehensive Income in order to spread the regular cost over the service lives of employees. The Bank has adopted the amendments to IAS 19; therefore actuarial gains and losses would no longer be deferred but recognised immediately in the period in which they occur.

The Plan is funded by payments from employees and the Bank, taking into account the recommendations of independent qualified actuaries.

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(cont'd)l. Employee benef its (cont'd)

ii. Post-employment medical benefitsThe Bank operates a post-employment medical benefit scheme for its retirees, whereby a subsidy is provided for premium due for member only contribution. The method of accounting, assumptions and the frequency of valuations are similar to those used for the defined benefit pension scheme.

m. Notes and coins

The stock of notes and coins is stated at original cost. Issues are accounted for using the First In First Out Method. All associated costs such as shipping, handling and insurance are expensed immediately. Printing and minting costs are expensed when the units of currency are issued and put into circulation.

n. Leases

i. Operating leases (as lessee)The leases entered into by the Bank are primarily operating leases. The total payments made under operating leases are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

ii. Finance leases (as lessor)Where the Bank grants long-term leases on property, the land and the building are treated as a finance lease. These finance leases are valued at the lower of the gross investment less principal payments and any

provisions in the lease, and the present value of the minimum lease payments receivable at the Statement of Financial Position date and are shown as receivable. Lease income is recognised over the term of the lease using the net investment method, which reflects a constant periodic rate of return.

o. Computer software

The Bank acquires computer software programmes to assist in the performance of its normal activities. These amounts are capitalised on the basis of the cost incurred to acquire and bring to use the specific software. These costs are amortised using the straight line method on the basis of the expected useful life of five years. Costs associated with maintaining computer software programmes are recognised as an expense as incurred.

Property, plant and equipment are recorded at cost less accumulated depreciation. Cost includes the purchase price of the assets plus any further cost incurred in bringing the asset to its present condition and location. Capital work-in-progress are recorded at cost but are not depreciated until the asset is available for its intended use. Any additions or improvements to assets during the year, which significantly add to the value of, or extend the useful life of such assets, are capitalised as part of the cost. All other repairs and maintenance are expensed in the Statement of Comprehensive Income during the financial period in which they were incurred. When an asset is retired or sold, any gain or loss on disposal is recognised in the Statement of Comprehensive Income.

Artwork, which is classified under Fixtures and Fittings, is initially carried at cost. The Bank’s Artwork is independently and professionally valuated and is carried at its revalued amount, being its fair value at the date of revaluation. Any increase

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in the carrying amount as a result of the revaluation is recognised in equity as a provision for revaluation of artwork except to the extent that the increase reverses a revaluation deficit of the Artwork previously recognised in the Statement of Comprehensive Income. The Bank will conduct valuations every four years, with the most recent being performed at September 2017. The next valuation is therefore due September 2021.

Depreciation is charged on a straight-line basis and is applied over the estimated useful lives of the assets, as shown below. Land is not depreciated.

Building 40 yearsBuilding improvements 10 years

over theLeasehold properties period of the

leaseMotor vehicles 4 yearsMachinery and equipment 1.5 to 5 yearsComputer hardware 3 yearsFurniture 10 yearsFixtures and Fittings 10 years

q. Taxation

Section 55(1) of the Central Bank Act exempts the Bank from the provisions of any Act relating to income taxation, company taxation and from the payment of stamp duty.

r. Provisions

The Bank has a policy of providing for all known and foreseeable losses in the accounts and has adopted a prudent approach to provisioning. Provisions shown on the Statement of Financial Position include the Foreign currency translation reserves, Gold revaluation reserves and Market value revaluation reserves.

s. Gold reserve

Gold is valued at the market price prevailing at the year end. No distinction is made between the price and currency revaluation differences for gold. Instead, a single gold valuation is accounted for on the basis of the price in Trinidad and Tobago dollars per troy ounce of gold.

t. Subscriptions to international f inancial institutions

The Bank acts as financial agent for the GORTT with international financial institutions (See Note 10). In order to provide a more appropriate presentation, these amounts include the portion of the GORTT’s contributions issued to these organisations in the form of Promissory Notes where applicable. These balances are stated at cost once there is no quoted market price in an active market and the fair value cannot be reliably determined. For those that are quoted in an active market, the instrument is carried at fair value based on the closing price at year end.

u. Capital

The entire capital of the Bank is held by the GORTT. Provision is made in Section 34(5) of the Central Bank Act for the Paid-up portion of the authorised capital of the Bank to be increased each year by an amount of not less than fifteen per cent (15%) of the amount to be paid into the Consolidated Fund, until the Paid-up portion of the Authorised Capital is equal to the Authorised Capital. Currently the Paid up portion of the Authorised Capital of the Bank is equal to the Authorised Capital (see Note 23).

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v. Reserves

Provision is made in Sections 35(3) and 35(6) of the Central Bank Act for the Bank to place in the General Reserve Fund or the Special Reserve Funds, or in both, an amount not exceeding ten per cent (10%) of the net surplus of the Bank for each financial year, until the General Reserve Fund is equal to the Authorised Capital. On 30 September 2015, the General Reserve Fund equalled to the amount of the Authorised capital of $800 million.

w. Transfer of surplus

The Central Bank Act states under section 35(5) that at the end of each financial year, after allowing for the amount referred to in section 35(3), the net profit of the Bank shall be paid into the Consolidated Fund.

x. Revenue recognition

i. Interest income and interest expenseInterest income and expense are recognised in the Statement of Comprehensive Income for all interest-bearing instruments on an accruals basis. Interest income includes coupons earned on fixed income investments and accrued discount and premium on treasury bills and other discount instruments.

ii. Dividend incomeDividend income is recognised when the right to receive payment is established.

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(cont'd)

iii. Other income and expensesAll other significant items of income and expenditure are accounted for on the accruals basis.

y. Comparatives

Where necessary comparative figures have been adjusted to take into account changes in presentation in the current year.

Operational risk is the risk of loss in both financial and non-financial terms resulting from human error and the failure of internal processes and systems. Operational risk management includes bank-wide corporate policies which describe the standard of conduct required of staff and specific internal control systems designed around the particular characteristics of various Bank activities.

In addition to operational risk, the Bank is exposed to various risks arising from its responsibility for the management of the official foreign currency reserves of the country. These risks and the measures taken to mitigate them in the portfolio are as follows:

Credit risk

The Bank takes on exposure to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due.

Credit risk is mitigated by the establishment of counterparty concentration limits and by the establishment of minimum rating standards that each counterparty must attain.

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Currency risk

The Bank takes on exposure to fluctuations in the prevailing foreign currency exchange rates on its foreign currency portfolios. Management seeks to mitigate currency risk by aligning the currency composition of the foreign portfolio to the settlement of trade and external debt.

Interest rate risk

The Bank invests in securities and maintains demand deposit accounts as a part of its normal course of business. Interest rate risk is the risk of loss arising from changes in prevailing interest rates. The Bank manages this risk by establishing duration limits for the portfolio.

Liquidity risk

The Bank is exposed to daily calls on its available cash resources from overnight deposits, current accounts and maturing deposits.

Liquidity risk is managed by the grouping of reserves into several tranches according to liquidity requirements, and defining specific asset classes and duration limits for each tranche, consistent with its defined liquidity objectives.

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Sep-17$’000

Sep-16$’000

Currency on hand 55,288 45,171

Balances held with banks 2,258,219 2,226,240

Repurchase agreements 1,532,271 6,710,515

Fixed deposits 25,546,194 30,715,168

Short-term investments 995,420 710,572

30,387,392 40,407,666

Represented by:

Foreign currency - cash and cash equivalents

Currency on hand 48,618 38,307

Balances held with banks 1,313,497 648,296

Repurchase agreements 1,475,171 6,710,515

Fixed deposits 25,546,194 30,715,168


29,338,210 38,740,864

Local currency - cash and cash equivalents

Cash on hand 6,670 6,864

Balances held with banks 944,722 1,577,944


Repurchase agreement 57,100 -

1,049,182 1,666,802

30,387,392 40,407,666

Local currency – balances with banksThis balance is comprised mostly of cheque deposits made by the GORTT which are sent forclearance at the commercial banks. These are settled against commercial banks’ reservebalances on the next working day.

CENTRAL BANK OF TRINIDAD AND TOBAGO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the year ended 30 September 2017 (Expressed in Trinidad & Tobago Dollars)

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5

Sep-17$’000

Sep-16$’000

Foreign currency investment securities

Available for sale 25,662,269 25,804,448

Loans and advances 84,128 119,457

25,746,397 25,923,905

Local currency investment securities

Available for sale - local securities 26,127 28,588


220,540 223,991

Total investment securities 25,966,937 26,147,896

Available for sale investments

Foreign currency

Amortised cost 24,915,778 24,948,206

(Depreciation)/appreciation in market value (41,184) 99,882

Appreciation in foreign currency 787,675 756,360

25,662,269 25,804,448

Local currency

Bonds 21,705 24,166

Investments in related enterprises (Note 6) 4,422 4,422

26,127 28,588

Total available for sale investments 25,688,396 25,833,036

Loans and advances

Foreign currency

Cost 84,128 119,457

84,128 119,457

Local currency


Provision for doubtful debts (335) (42)

194,413 195,403

Total loans and advances 278,541 314,860

Total investment securities 25,966,937 26,147,896


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The Bank has an interest in the following related enterprises to help promote thedevelopment of the country’s financial infrastructure:

Sep-17$’000

Sep-16$’000

Trinidad and Tobago Unit Trust Corporation 2,500 2,500

Deposit Insurance Corporation 1,000 1,000

Trinidad and Tobago Interbank Payments System 922 922

4,422 4,422

The Bank also has a related interest in the Office of the Financial Services Ombudsman (OFSO). The main objectives of the OFSO are to receive complaints arising from the provision of financial services to individuals and small businesses, and to facilitate the settlement of these complaints. The Ombudsman is provided with a secretariat drawn from or approved by the Central Bank. The remuneration of the Financial Services Ombudsman and the costs of establishing the Ombudsman scheme are borne by the Bank, while recurrent operational costs of the Office are funded by the financial institutions.


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a. Fair value hierarchyThe fair value of the Bank’s assets and liabilities are analysed by the fair valuationhierarchy below:

Recurring fair value measurement of assets and liabilities

Quantitative disclosures fair value measurement hierarchy for assets as at 30 September 2017

FINANCIAL ASSETS Level 1 Level 2 Level 3 Total

$'000 $'000 $'000 $'000

Asset-backed Securities:

Auto Loan Receivable 1,027,013 1,027,013

Credit Card Receivable 1,359,143 1,359,143

Other Asset-backed Securities 516,436 516,436

Corporate Bonds 3,286,488 3,286,488

Mortgage-backed Securities:

Federal Home Loan Mortgage Corporation (FHLMC) 345,960 345,960

Federal National Mortgage Association (FNMA) 993,973 993,973

Government National Mortgage Association (GNMA) I 12,149 12,149

Government National Mortgage Association (GNMA) 11 65,874 65,874

Collateralized Mortgage backed Securities (CMO) 76,176 76,176

Other Mortgages -

Government Issues 17,449,579 17,449,579

Gold 536,275 536,275

Investments in related enterprises 4,422 4,422

Municipals 14,908 14,908

Artwork 14,925 14,925

Total 536,275 25,162,624 4,422 25,703,321


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The Bank had no traded financial liabilities at the reporting date.

Assessing the significance of a particular input to the entire measurement requires judgement, taking into account factors specific to the asset or liability. Furthermore, the estimated fair values of certain financial instruments have been determined using available market information or other appropriate valuation methodologies that require judgement in interpreting market data and developing estimates. Consequently, the estimates made do not necessarily reflect the amounts that the Bank could realise in a current market exchange.

(cont'd)a. Fair value hierarchy (cont'd)Recurring fair value measurement of assets and liabilities (cont'd)

Quantitative disclosures fair value measurement hierarchy for assets as at 30 September 2016

FINANCIAL ASSETS Level 1 Level 2 Level 3 Total

$'000 $'000 $'000 $'000

Asset-backed Securities:

Auto Loan Receivable 1,455,888 1,455,888

Credit Card Receivable 1,538,747 1,538,747

Other Asset-backed Securities 440,599 440,599

Corporate Bonds 3,840,605 3,840,605

Mortgage-backed Securities:

Federal Home Loan Mortgage Corporation (FHLMC) 369,887 369,887

Federal National Mortgage Association (FNMA) 936,467 936,467

Government National Mortgage Association (GNMA) I 15,452 15,452

Government National Mortgage Association (GNMA) 11 78,693 78,693

Collateralized Mortgage backed Securities (CMO) 97,748 97,748

Other Mortgages -

Government Issues 16,506,313 16,506,313

Gold 548,215 548,215


Artwork 14,269 14,269

Total 548,215 25,294,668 4,422 25,847,305

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(cont'd)

b. Transfers between fair value hierarchy levelsThere were no transfers between the hierarchy levels during the period 1 October 2016 and 30 September 2017.

1Assets and liabilities categorized as Level 1 are those whose values are based on quoted market prices in active markets. No adjustments are made to the quoted price when determining the fair value of these assets.

Assets and liabilities categorized as Level 2 are valued based on a compilation of primarily observable market information. This includes broker quotes in a non-active market, alternative pricing sources supported by observable inputs and investments in securities with fair values obtained via fund managers.

3The Bank investments in several related companies are accounted for as available-for-sale investments (see Note 6). However, none of these equity investments have a quoted market price in an active market and therefore their fair value cannot be reliably measured. The cost of these equity investments is therefore considered a reasonable approximation of fair value.

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Sep-17$’000

Sep-16$’000

Consolidated statement of financial position obligations for:

- Pension plan 129,330 147,903

- Post-retirement medical plan (22,369) (26,355)

106,961 121,548

a) Pension plan

Defined benefit obligation (705,663) (680,342)

Fair value of assets 834,993 828,245

IAS 19 net defined asset 129,330 147,903

Reconciliation of opening and closing defined benefit assets

Defined benefit asset at prior year end 147,903 202,256

(Decrease) in pension asset

Net pension cost (16,042) (20,421)

Re-measurements of net define benefit asset/liability (9,274) (40,853)

Bank contribution paid 6,743 6,921

(18,573) (54,353)

Closing defined benefit asset 129,330 147,903

Amounts recognised in the earnings statement

Current service cost (23,912) (20,382)

Net interest on net defined benefit liability/(asset) 9,233 12,509

Past service cost - (11,334)

Expense allowance (1,363) (1,214)

Net pension cost (16,042) (20,421)

Re-measurements of net defined benefit asset/liability

Experience losses (9,274) (40,853)

Actuarial assumptions

Discount rate 6.00% 6.00%

Expected return on plan assets n/a n/a

Projected future rate of salary increase 5.18% 5.18%

Value of Pension Scheme Asset Based on Estimated Fair Value at Balance Sheet Date

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b) Post-employment medical plan

Sep-17 Sep-16

$'000 $'000

IAS 19 net defined obligation (22,369) (26,355)

Reconciliation of opening and closing defined benefit liability

Defined benefit liability (26,355) (22,716)

(Decrease)/increase in plan

Net benefit cost (3,020) (2,684)

Re-measurements of net define benefit asset/liability 6,651 (1,338)

Bank contribution paid 355 383

3,986 (3,639)

Closing defined benefit liability (22,369) (26,355)

Amounts recognised in the earnings statement

Current service cost (1,453) (1,334)

Interest on defined benefit obligation (1,567) (1,350)

Net benefit cost (3,020) (2,684)

Actuarial assumptions

Medical cost increases 5.00% 5.00%

(cont'd)

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Sep-17$’000

Sep-16$’000

Foreign receivables

Pending trades - investments sold 4,951,982 4,170,102

Foreign interest receivable 124,362 98,527

Other receivables 3,042 2,805

5,079,386 4,271,434

Accounts receivable and prepaid expenses

Interest receivable on domestic investments 160 6,756

Amounts recoverable from CLF/GORTT (Note 25) 2,197,232 2,194,127

Other receivables 2,122 25,033

Prepayments 8,533 8,587

Suspense accounts- pending transfers (202) 397

Value added tax 302 640

2,208,147 2,235,540

10

Sep-17$’000

Sep-16$’000

Banco Latino Americano De Exportaciones 31,882 30,387

Caribbean Development Bank 8,194 8,194

Caribbean Information and Credit Rating Services Ltd 1,769 1,761

Corporacion Andina de Formento 726,650 723,535

Inter-American Development Bank 6,694 6,694

International Bank for Reconstruction and Development 118,905 118,395

International Development Association 6,535 6,531

International Finance Corporation 333 333

International Monetary Fund 4,398,671 4,398,712

5,299,633 5,294,542

The holdings in Banco Latino Americano De Exportaciones (Bladex) are based on a quotedmarket price off the New York Stock Exchange of US$29.44/share as at 30 September 2017.

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11

Sep-17$’000

Sep-16$’000

Leased asset 93,988 106,382

Stock of notes and coins 78,599 72,716

Consumables 1,971 1,838

174,558 180,936

Leased AssetIn 1995 the Bank entered into a thirty-year finance lease agreement with the GORTT for the purchase of the Ministry of Finance Building with a rate of interest of 2%.

Sep-17$’000

Sep-16$’000

Gross receivable due 101,656 116,178

Present value of minimum lease payments (93,988) (106,382)

Total unearned finance income 7,668 9,796

Gross receivables due

Not later than one year 14,522 14,522

Later than one year but within five years 58,089 58,089

Later than five years 29,045 43,567

101,656 116,178

Less: unearned finance income (7,668) (9,796)

Net investment in finance leases 93,988 106,382

The net investment in finance leases is analysed as follows:

Sep-17$’000

Sep-16$’000

Not later than one year 14,237 14,237

Later than one year but within five years 54,212 54,212

Later than five years 25,539 37,933

93,988 106,382

Inventory of notes and coinsSep-17$’000

Sep-16$’000

Notes 56,432 52,038

Coins 22,167 20,678

78,599 72,716


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11 (cont'd)

Inventory of notesSep-17$’000

Sep-16$’000

Opening balance 52,038 73,734

Cost of notes issued (37,409) (34,032)

Purchase of notes 41,803 12,336

Closing balance 56,432 52,038

Inventory of coinsSep-17$’000

Sep-16$’000

Opening balance 20,678 33,785

Cost of coins issued (13,892) (34,113)

Purchase of coins 17,896 21,006

Provision (2,515) -

Closing balance 22,167 20,678

The Bank discontinued the issuance of the one cent coins, as well as changed the metallic composition for the other denominations. The stock of one cent pieces together with the other denominations minted with the original metallic composition will no longer be issued. As a result, a provision has been recorded to reflect the net realisable value of these coins.


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12

Effective 1 October 2016, the Bank changed the depreciable life of motor vehicles from

3 years to 4 years. This change in the periodic consumption is more consistent with the

actual pattern of consumption of future economic benefits embodied in the Bank’s motor

vehicles. The effect on the current year is a decrease in depreciation expense and an

increase in the carrying amount of motor vehicles by $1.083 million. Over the subsequent

financial periods 2018 to 2020, depreciation expense will increase by $1.083 million

while the impact on the carrying value of the Bank’s motor vehicles will nullify in July

2020.

As at 30th

September 2017

Land &

Building

Leasehold

Property

Machinery &

Equipment

Computer

Equipment

Furniture,

Fixture &

Fittings,

Artwork

Capital

work in

progress

Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Net book value

Balance b/fwd

01 Oct 2016 115,314 10,665 14,963 12,851 28,689 11,739 194,221

Transfers 1,132 - 2,718 8,435 194 (12,479) -

Additions 1,007 - 1,130 1,582 1,449 4,484 9,652

Disposals (62) - (56) - (118)

Revaluation

adjustment - - - - 816 - 816

Depreciation

for the year (12,201) (8) (5,642) (7,433) (3,133) - (28,417)

Balance c/fwd 105,190 10,657 13,169 15,435 27,959 3,744 176,154

Represented by:

Cost 441,238 10,923 111,733 67,183 61,982 3,744 696,803

Accumulated

depreciation(336,048) (266) (98,564) (51,748) (34,023) - (520,649)

105,190 10,657 13,169 15,435 27,959 3,744 176,154


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12 (cont'd)

As at 30th September 2016

Land & Building

Leasehold Property

Machinery & Equipment

Computer Equipment

Furniture, Fixture & Fittings, Artwork

Capital work in

progress

Total

$'000 $'000 $'000 $'000 $'000 $'000 $'000

Net book value

Balance b/fwd 01 Oct 2015 126,539 10,672 20,903 15,571 29,076 14,567 217,328

Transfers 1,082 - 1,379 1,430 582 (4,473) -

Additions 557 - 3,793 3,444 2,580 1,645 12,019

Disposals - - (832) - (8) - (840)

Depreciation for the year (12,864) (7) (10,280) (7,594) (3,541) - (34,286)

Balance c/fwd 115,314 10,665 14,963 12,851 28,689 11,739 194,221

Represented by:

Cost 439,161 10,923 107,944 57,343 59,610 11,739 686,720

Accumulated depreciation (323,847) (258) (92,981) (44,492) (30,921) - (492,499)

115,314 10,665 14,963 12,851 28,689 11,739 194,221

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1

Sep-17$’000



Demand liabilities - foreign

Foreign deposits 5,161 6,969 3,713

Government special accounts 784,538 596,909 429,612

789,699 603,878 433,325

Demand liabilities - local

Notes in circulation 8,660,520 8,400,294 8,270,823

Coins in circulation 234,489 229,952 218,251

Deposits by commercial banks 16,533,504 19,484,281 22,758,976

Deposits by non-banking financial institutions 419,813 662,505 394,589

Statutory deposits - insurance companies 8,476 16,305 42,074

Deposits by government and government agencies (6,625,833) (1,127,969) (5,490,570)

Deposits by other current accounts 3,666,516 2,533,665 2,019,006

Deposits by regional and international institutions 659,328 243,260 210,104

Promissory Notes due to International Monetary Fund 2,932,537 2,932,537 1,878,498

26,489,350 33,374,830 30,301,752

Deposits by Financial InstitutionsThe required statutory cash reserve ratios for commercial banks and non-bank financial institutions remained unchanged at 17 percent and 9 percent respectively of their prescribed liabilities. Non–banks required reserves increased by 4.8 percent whilst Commercial banks’ required reserves increased marginally by 0.7 percent as at September 2017, as a result of their higher prescribed liabilities. In addition to the statutory cash reserves, the commercial banks continued to hold a secondary reserve of 2 percent of their prescribed liabilities. A fixed rate of 0.25 percent was paid on these holdings.

Due to the anticipated tightening in liquidity conditions in the domestic financial system as a direct result of increased fund-raising activities by the Government, the $1.5 billion one-year special fixed deposit held by the commercial banks at the Central Bank, which matured on 14 March 2017, was not rolled over.

Interest paid to the commercial banks on the matured fixed deposit during the financial year totaled $11.25 million (30 September 2016 - $24 million).

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1Sep-17$’000

Sep-16$’000

Accounts payable - Foreign

Bilateral accounts 16,702 20,515

Pending trades - investments purchased 5,278,614 4,757,787

Other payables 11,979 380

5,307,295 4,778,682

Accounts payable - Local

Trade payables and accrued charges 63,357 56,259

Interest payable 2,944 6,564

Unclaimed monies 17,558 17,174

Government special accounts 112,451 111,992

Blocked accounts 27,204,781 30,955,093

Other payables 24,146 23,350

27,425,237 31,170,432

Blocked accountsThese accounts represent funds withheld when liquidity levels are considered to be too high. Typically these funds are Open Market Operations Instruments (OMO), treasury bills and treasury notes, as well as Government Bonds. The resources absorbed from the system are then sterilized (held in blocked accounts at the Central Bank).

15

The Bank has adopted a prudent approach for provisioning in order to maintain adequate capacity to fulfil its functions. This accounting treatment reflects the limitations on the creation of reserves set out in Section 35 of the Central Bank Act. The Act specifies the terms and conditions governing General and Special Reserve funds and the creation of provisions for bad and doubtful debts, depreciation in assets, contributions to staff pension benefits and other contingencies, before payment of the net surplus for the financial year to the GORTT. This is a departure from the definition outlined in IAS 37 Provisions, Contingent Liabilities and Contingent Assets. The provisions shown on the Statement of Financial Position comprise:

Sep-17$’000



Provisions

Gold reserve 334,839 347,583 238,673

Foreign currency exchange rate reserves 5,571,277 5,306,821 1,929,507

Pension reserve 106,961 121,548 179,540

Revaluation reserve on investments (11,401) 96,654 (114,342)

6,001,676 5,872,606 2,233,378

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1

Sep-17$’000

Restated Sep-16$’000

Investment income

Interest on United States Dollar balances & securities 714,565 546,646

Interest on Sterling balances & securities 35 1,377

Interest on other foreign balances & securities 916 1,062

Other income (Note 28ii) 15,658 13,166

731,174 562,251

Investment expenses (27,492) (26,363)


Net loss realised on disposal and amortisation of investment

Gains realised on disposal of investments 84,488 24,248

Losses realised on disposal of investments (223,474) (336,261)

(138,986) (312,013)

Total Income from foreign assets 463,178 187,466

Other income for September 2016 has been restated from $1.5 million to $13.2 million.This restatement relates to management fees from Heritage Stabilization Fund and remuneration from the International Monetary Fund which were previously presented under Income from local currency assets – Other income. Refer to note 28ii (Prior period restatements - Reclassification of foreign currency income) for further details.

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Sep-17$’000


Interest income

Loans 987,848 961,839

Other investments 16,149 9,370

1,003,997 971,209

Other Income

General earnings 37 71

Fees charged to financial institutions 62,256 61,601

Profit on sale of assets 20 400

Other (Note 28ii) 1,619 1,319

63,932 63,391

1

Sep-17$’000

Sep-16$’000

Cost of new notes issued 37,409 34,032

Cost of new coins issued 13,880 34,109

Other printing and minting expenses 1,016 13,313

Total costs for printing of notes and minting of coins 52,305 81,454

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Sep-17$’000

Sep-16$’000

Salaries and allowances 204,622 199,119

National insurance 8,127 6,892

Employee benefits- pension and post retirement medical (Note 8) 14,587 57,992

Other staff costs 25,980 24,908

253,316 288,911

20

Sep-17$’000

Sep-16$’000

Other operating expenses include:

Advertising and public relations 1,419 1,990

CL Financial expenses (Note 25) 3,165 3,180

Computer expenses 21,279 17,376

Conferences and meetings 2,980 4,747

Contribution to other organizations 2,650 5,260

Electricity 3,783 4,216

Insurance 3,262 2,449

Library expenses 2,948 2,658

Loss on disposal of assets 62 123

Maintenance cost 22,552 21,776

Printing and stationery 3,007 3,306

Professional fees 2,808 3,303

Rent 3,609 3,224

Telephone 4,060 4,770

Other Expenses 2,659 7,649

80,243 86,027

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21

There was a $1.4 million in outstanding commitments for capital expenditure as at 30 September 2017 (30 September 2016 - $0.8 million)

22

a. Operating leases where the Bank is the lessorThe Bank currently has one lease arrangement for office space located within the Bank’s building. The tenant is charged monthly rental and service fees based on the square footage occupied.

b. Operating leases where the Bank is the lesseeThe Bank also leases equipment and premises under operating lease arrangements. The leases have varying terms, escalation clauses and renewal rights.

2

Sep-17$’000

Sep-16$’000

Authorised capital 800,000 800,000

Paid-up capital 800,000 800,000

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b. Related enterprisesThese Financial Statements include the following transactions with related enterprises (see Note 6) during the year:

Sep-17$’000

Sep-16$’000

Income

Rental income 263 360

Other income 39 61

301 420

Expenditure

Salaries and related expenditure 990 535

990 535

Ending period balances


Receivables from related enterprises - 17

Payables to related enterprises 2,418,966 1,277,136

2

a. Government of the Republic of Trinidad and TobagoThe Bank as part of its regular operations enters into various transactions with the GORTT,state owned entities, state agencies and local government bodies. It should be noted thatall transactions are done at arms’ length and in accordance with normal business practices.Transactions and balances with the Bank and these entities are listed below:

Sep-17$’000

Sep-16$’000

Interest income from local currency assets 987,749 963,856

Interest expense 56,009 55,701

Assets

Local currency investment securities 21,705 24,166

Liabilities

Demand liabilities - foreign 784,538 596,909

Demand liabilities - local (5,377,103) 79,560

Accounts payable 27,204,781 30,955,093

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2 cont'd

c. Key management compensationKey management personnel are those persons having authority and responsibility forplanning, directing, and controlling the key activities of the Bank, directly or indirectly,including all executives, senior, middle and junior managers.

Sep-17$’000

Sep-16$’000

Short-term employee benefits 63,471 62,572


25

During January 2009, representatives of CL Financial Limited (CLF) met with the Bank and the Ministry of Finance requesting urgent liquidity support for CLICO Investment Bank Limited (CIB), CLICO (Trinidad) Limited (CLICO) and British American Insurance Co (Trinidad) Limited (BAT). On 30 January 2009, in an effort to protect the interest of depositors and policyholders, the Minister of Finance entered into a Memorandum of Understanding with CLF for the provision of liquidity support for CIB, CLICO and BAT under certain conditions.

On 31 January 2009 the Bank assumed control of CIB, under Section 44D of the Central Bank Act (the Act) and consequent to an amendment to the Act, it also assumed control of CLICO and BAT on 13 February 2009.

As a result of these actions the Bank currently has in its Financial Statements the followingassets:

Sep-17$’000

Sep-16$’000

Assets

Amounts recoverable from CLF/GORTT 2,197,232 2,194,127

The Bank together with CLICO has initiated civil proceedings against former executives ofCLICO. In the context of delays with criminal action, this suit was filed with the dual objective of bringing those responsible to justice and recovering monies spent by the GORTT. The outcome of this matter cannot reliably be estimated at this time.

Legal, consultancy and other costs incurred in relation to all CLF matters have been disclosed in Note 20.

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2

The Bank is currently involved in claims and counterclaims arising from the conduct of its business. Based on the facts currently available to the Bank, it has been concluded that the outcome of these matters would not have a material adverse effect on the position of the Bank.

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2

ASSETSCurrent$’000

Sep-17Non-Current

$’000Total$’000


Foreign currency cash and cash equivalents 29,338,210 - 29,338,210

Foreign currency investment securities 7,260,000 18,126,397 25,746,397

Foreign receivables 5,079,386 - 5,079,386

Subscriptions to international financial institutions - 5,299,633 5,299,633

International Monetary Fund - Holdings of Special Drawing Rights - 2,267,737 2,267,737

42,037,596 25,693,767 67,731,363


Local currency cash and cash equivalents 1,049,182 - 1,049,182

Local currency investment securities 33,954 186,586 220,540

Retirement benefit asset - 106,961 106,961

Accounts receivable and prepaid expenses 2,207,506 641 2,208,147

Other assets 79,599 94,959 174,558

Property, plant and equipment - 176,154 176,154

3,370,241 565,301 3,935,542

TOTAL ASSETS 45,407,837 26,259,068 71,666,905

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2(cont'd)

LIABILITIESCurrent$’000

Sep-17Non-Current

$’000Total$’000


Demand liabilities - foreign 789,699 - 789,699

International Monetary Fund - Allocation of Special Drawing Rights - 3,006,741 3,006,741

Accounts payable 5,307,295 - 5,307,295

6,096,994 3,006,741 9,103,735


Demand liabilities - local 26,487,614 1,736 26,489,350

Accounts payable 105,546 27,319,691 27,425,237

Provision for transfer of surplus to government 1,046,636 - 1,046,636

Provisions - 6,001,676 6,001,676

27,639,796 33,323,103 60,962,899


Capital - 800,000 800,000

General reserve - 800,000 800,000

Retained earnings - 271 271

- 1,600,271 1,600,271

TOTAL LIABILITIES, CAPITAL AND RESERVES 33,736,790 37,930,115 71,666,905

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2(cont'd)


Sep-16Non-Current

$’000Total$’000







49,458,169 27,040,587 76,498,756



Local currency investment securities 72,178 151,813 223,991


Accounts receivable and prepaid expenses 30,474 2,205,066 2,235,540

Other assets 73,561 107,375 180,936


1,843,015 2,780,023 4,623,038

TOTAL ASSETS 51,301,184 29,820,610 81,121,794

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2(cont'd)


Sep-16Non-Current

$’000Total$’000


Demand liabilities - foreign 591,952 11,926 603,878


Accounts payable 4,778,656 26 4,778,682

5,370,608 3,018,721 8,389,329


Demand liabilities - local 30,419,257 2,955,574 33,374,830


Provision for transfer of surplus to government 714,026 - 714,026

Provisions - 5,872,606 5,872,606

31,229,769 39,902,125 71,131,894


Capital - 800,000 800,000


Retained earnings - 571 571

- 1,600,571 1,600,571


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2(cont'd)


Sep-15Non-Current

$’000Total$’000







54,453,068 18,978,572 73,431,640



Local currency investment securities 4,393,188 96,460 4,489,648


Accounts receivable and prepaid expenses 60,320 2,115,549 2,175,869

Other assets 108,459 119,520 227,979


6,271,582 2,728,397 8,999,979

TOTAL ASSETS 60,724,650 21,706,969 82,431,619

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2(cont'd)


Sep-15Non-Current

$’000Total$’000




Accounts payable 3,894,425 - 3,894,425

4,321,178 2,872,773 7,193,951




Provision for transfer of surplus to government 809,011 - 809,011

Provisions - 2,233,378 2,233,378

29,301,095 44,335,402 73,636,497


Capital - 800,000 800,000


Retained earnings - 1,171 1,171

- 1,601,171 1,601,171


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2

i. Restatement of International Monetary Fund balancesDuring the year a decision was taken to amend the accounting methodology for the International Monetary Fund (IMF) balances which resulted in certain adjustments. These adjustments gave rise to a $2.9 billion reclassification between Liability line items on the face of the Balance Sheet under Demand liability-Local and Provisions, but neither impacted the Bank’s Net Assets nor the Income Statement. This amendment now brings the accounting in line with the recommended treatment by the IMF.

Due to the significant value, the Bank’s financial statements and related notes were restated in accordance to the requirements of the International Financial Reporting Standards (IFRS). Refer to Note 13 (Demand liabilities) and Note 15 (Provisions) for further details.

Previously reportedSep-16$’000


AdjustmentSep-16$’000

LIABILITIES



Net liabilities 30,442,293 33,374,830 2,932,537




LIABILITIES


Provision 8,805,143 5,872,606 (2,932,537)

Net liabilities 8,805,143 5,872,606 (2,932,537)




LIABILITIES



Net liabilities 28,423,253 30,301,751 1,878,498




LIABILITIES


Provision 4,111,876 2,233,378 (1,878,498)

Net liabilities 4,111,876 2,233,378 (1,878,498)


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2 (cont'd)

ii. Reclassif ication of foreign currency incomeManagement fees received from the Heritage and Stabilisation Fund and remuneration from the International Monetary Fund both previously presented under local income – other, were reclassified to foreign income-other. Refer to note 16 (Income from foreign currency assets) and Note 17 (Income from local currency assets) for further details.





Investment Income 550,666 562,251 11,585

Net impact on income from foreign currency assets 550,666 562,251 11,585





Other Income 74,976 63,390 (11,586)

Net impact on income from local currency assets 74,976 63,390 (11,586)


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2The Financial Statements of the Central Bank of Trinidad and Tobago are presented below:

Statement of Financial Position 3 17

ASSETSSep-17$’000




Foreign currency cash and cash equivalents 29,338,210 38,740,864 36,998,052


Foreign receivables 5,079,386 4,271,434 3,759,555

Subscriptions to international financial institutions 5,299,633 5,294,542 3,837,933

International Monetary Fund - Holdings of Special Drawing Rights 2,267,737 2,268,011 2,461,370

67,731,363 76,498,756 73,431,640


Local currency cash and cash equivalents 1,049,182 1,666,802 1,709,615

Local currency investment securities 220,540 223,991 4,489,648

Retirement benefit asset 106,961 121,548 179,540

Accounts receivable and prepaid expenses 2,208,147 2,235,540 2,176,118

Other assets 174,558 180,936 227,979

Property, plant and equipment 176,154 194,221 217,328

3,935,542 4,623,038 9,000,228

TOTAL ASSETS 71,666,905 81,121,794 82,431,868


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2 (cont'd)

Statement of Financial Position 3 17(cont'd)

LIABILITIESSep-17$’000





International Monetary Fund - Allocation of Special Drawing Rights 3,006,741 3,006,769 2,866,201

Accounts payable 5,307,295 4,778,682 3,894,425

9,103,735 8,389,329 7,193,951



Accounts payable 27,425,508 31,171,003 40,293,777

Provision for transfer of surplus to government 1,046,636 714,026 809,011

Provisions 6,001,676 5,872,606 2,233,378

60,963,170 71,132,465 73,637,917


Capital 800,000 800,000 800,000

General reserve 800,000 800,000 800,000

1,600,000 1,600,000 1,600,000



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2 (cont'd)

Statement of Comprehensive Income3 17

Sep-17$’000



Investment income 731,174 562,251

Investment expense (27,492) (26,363)

703,682 535,888


Net loss realised on disposal and amortisation of investments (138,986) (312,013)

463,178 187,466


Interest income 1,003,997 971,209

Rental income 2,192 2,302

Other income 64,232 63,991

1,070,421 1,037,502

Decrease in provisions 6,789 57,383

Total income 1,540,388 1,282,351

Operating expenses

Printing of notes and minting of coins 52,305 81,454

Salaries and related expenses 253,316 288,911

Interest paid 78,303 76,519


Depreciation 28,417 34,286

Other operating expenses 80,243 86,027

Total operating expenses 493,752 568,325

Net surplus for the period 1,046,636 714,026

Total comprehensive income for the period 1,046,636 714,026

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2 (cont'd)

Statement of Changes in Equity 3 17

Issued and Fully Paid Up Capital

General Reserves

Retained Earnings Total

$'000 $'000 $'000 $'000

Balance as at 1st October 2015 800,000 800,000 - 1,600,000

Net surplus for the period - - 714,026 714,026

Transfer of surplus to Consolidated Fund - - (714,026) (714,026)

Balance as at 30th September 2016 800,000 800,000 - 1,600,000

Balance as at 1st October 2016 800,000 800,000 1,600,000

Net surplus for the period - - 1,046,636 1,046,636

Transfer of surplus to Consolidated Fund - - (1,046,636) (1,046,636)

Balance as at 30th September 2017 800,000 800,000 - 1,600,000

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2 (cont'd)

Statement of Cash Flows 3 17

Sep-17

$’000

Restated

Sep-16

$’000

Restated

Sep-15

$’000

Cash flows from operating activities

Net surplus for the year before taxation 1,046,636 714,026 842,732

Adjustments for:

Depreciation 28,417 34,286 35,317

Net loss on disposal of fixed assets 98 (277) (622)

Interest income (1,719,513) (1,531,879) (1,327,156)

Interest expense 78,303 76,519 80,007

Dividend income (1,967) (2,181) (144,534)

Provisions (6,789) (57,383) (159,251)

Revaluation of Artwork (816) - -

Cash outflow before changes in

operating assets and liabilities (575,631) (766,889) (673,507)

Changes in operating assets and liabilities

(Increase)/decrease in accounts

receivable & prepaid expenses (761,320) (554,794) 2,202,018

(Increase)/decrease in other assets (6,016) 34,890 21,987

Decrease in pension asset 14,587 57,992 96,709

(Decrease)/increase in accounts payable and other liabilities (9,920,368) (4,985,601) 4,764,966

Net cash flow (used in)/from operations (11,248,748) (6,214,402) 6,412,173


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Statement of Cash Flows 3 17 (cont'd)

Cash flows from investing activities

Sep-17

$’000

Restated

Sep-16

$’000

Restated

Sep-15

$’000

Purchase of property, plant and equipment (9,652) (12,019) (32,700)

Proceeds from sale of property, plant and equipment 20 1,117 848

Net proceeds from sale/(purchase of) investments 428,347 5,356,624 (5,035,655)

Net repayment/(issue) of loans and advances 35,968 (12,108) 95,143

Interest received 1,700,274 1,514,763 1,391,435

Dividends received 1,967 2,181 144,534

Interest paid (81,923) (85,800) (90,771)

Net decrease/(increase) in International Monetary Fund

Holding of Special Drawing Rights and Allocation account 246 333,927 (32,352)

Payment to Consolidated Fund (714,026) (809,013) (177,364)

Net cash flow from/(used in) investing activities 1,361,221 6,289,672 (3,736,882)

Cash flows from financing activities

Lease payment 12,394 12,152 11,913

Net cash flow from financing activities 12,394 12,152 11,913

Net (decrease)/ increase in cash and cash equivalents (9,875,133) 87,422 2,687,204

Foreign currency differences in

monetary assets & liabilities (145,141) 1,612,577 312,849

Cash and cash equivalents, beginning of period 40,407,666 38,707,667 35,707,614

Cash and cash equivalents, end of period 30,387,392 40,407,666 38,707,667


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A P P E N D I C E S0 1 0 1

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END OF MONTH

NOTES NOTES TOTAL NOTES IN CIRCULATION

COINS TOTAL CURRENCY IN CIRCULATION

Sep-12 19,044 5,622,561 5,641,605 184,517 5,826,122

Sep-13 19,044 6,347,514 6,366,558 195,715 6,562,273

Sep-14 19,044 7,184,467 7,203,511 206,618 7,410,129

Sep-15 19,044 8,239,292 8,258,336 218,238 8,476,574

Sep-16 19,044 8,374,404 8,393,448 229,944 8,623,392

Oct-16 19,044 8,350,978 8,370,022 230,676 8,600,698

Nov-16 19,044 8,517,279 8,536,323 231,922 8,768,245

Dec-16 19,044 9,113,477 9,132,521 232,997 9,365,518

Jan-17 19,044 8,482,575 8,501,619 233,327 8,734,946

Feb-17 19,044 8,590,324 8,609,368 233,396 8,842,764

Mar-17 19,044 8,588,102 8,607,146 233,564 8,840,710

Apr-17 19,044 8,628,380 8,647,424 233,848 8,881,272

May-17 19,044 8,694,345 8,713,389 234,339 8,947,728

Jun-17 19,044 8,762,791 8,781,835 234,693 9,016,528

Jul-17 19,044 8,706,946 8,725,990 234,464 8,960,454

Aug-17 19,044 8,586,305 8,605,349 234,327 8,839,676

Sep-17 19,044 8,634,825 8,653,869 234,480 8,888,349


T A A 1CURRENCY IN CIRCULATION1 17

T A A16 17

LIABILITIES

DEPOSITS

END OF MONTH

CURRENCY IN CIRCULATION

TOTALCOMMERCIAL

BANKS

NON-BANK FINANCIAL

INSTIUTIONS

1 GOVERNMENT & GOVERNMENTAL ORGANISATIONS

INTERNATIONAL ORGANISATIONS

OTHER LIABILITIES

CAPITAL & RESERVE FUNDS

TOTAL LIABILITIES, CAPITAL AND

RESERVES

2015/16

OCT 8,407,342 19,828,529 424,537 (4,070,298) 2,866,201 43,644,193 1,600,000 72,700,504

NOV 8,448,152 21,187,066 392,145 (5,151,994) 2,866,201 42,620,249 1,600,000 71,961,819

DEC 9,103,151 22,023,112 383,135 (5,020,455) 2,866,201 43,746,670 1,600,000 74,701,814

JAN 8,488,647 21,954,978 385,332 (4,590,813) 2,866,201 45,823,008 1,600,000 76,527,353

FEB 8,470,191 21,223,484 384,865 (4,331,224) 2,866,201 43,904,879 1,600,000 74,118,396

MAR 8,793,059 21,122,355 386,959 (5,043,398) 2,866,201 43,246,165 1,600,000 72,971,341

APR 8,604,132 23,187,078 396,514 (6,180,533) 3,016,995 43,635,915 1,600,000 74,260,101

MAY 8,809,232 21,935,706 503,891 (3,846,358) 3,016,995 44,222,283 1,600,000 76,241,749

JUN 8,636,013 21,606,313 695,775 (4,035,914) 2,980,620 46,039,013 1,600,000 77,521,820

JUL 8,718,892 19,516,482 706,231 (2,708,403) 2,980,620 45,862,033 1,600,000 76,675,855

AUG 8,722,302 19,765,275 665,512 3,020,930 2,979,569 43,486,482 1,600,000 80,240,070

SEP 8,630,247 19,484,281 662,505 1,648,956 3,006,769 46,089,036 1,600,000 81,121,794

2016/17

OCT 8,610,168 20,055,797 602,040 (307,350) 2,968,744 46,635,114 1,600,000 80,164,513

NOV 8,778,163 20,422,916 638,023 (3,190,138) 2,968,744 46,816,051 1,600,000 78,033,759

DEC 9,374,818 18,772,718 624,029 (3,415,371) 2,968,744 47,234,700 1,600,000 77,159,638

JAN 8,744,714 19,296,834 792,064 (3,487,544) 2,968,744 46,005,276 1,600,000 75,920,088

FEB 8,853,548 20,357,733 810,230 (4,129,475) 2,925,819 43,121,587 1,600,000 73,539,442

MAR 8,852,203 18,733,077 738,756 (2,312,865) 2,925,819 44,531,354 1,600,000 75,068,344

APR 8,890,653 20,119,636 531,960 (3,285,852) 2,964,687 43,267,860 1,600,000 74,088,944

MAY 8,958,006 18,614,557 234,600 (3,638,072) 2,964,687 44,200,479 1,600,000 72,934,257

JUN 9,024,203 17,140,104 393,013 (3,232,425) 2,964,687 43,978,764 1,600,000 71,868,346

JUL 8,968,097 17,393,153 409,116 (2,633,709) 3,006,741 44,106,759 1,600,000 72,850,157

AUG 8,848,026 17,838,225 314,282 (3,532,237) 3,006,741 43,297,793 1,600,000 71,372,830

SEP 8,895,009 16,533,504 419,813 632,642 3,006,741 40,579,198 1,600,000 71,666,905


1 Includes Exchequer, Trust Funds and Other Public Deposits, Government SDR Allocation and Other Deposits2 Includes Foreign Currencies on hand

ASSETS

EXTERNAL ASSETS

2 BALANCES

WITH BANKS ABROAD

OTHER FOREIGN

SECURITIES

GOLD SUBSCRIPTION

TO INTERNATIONAL

MONETARY FUND

SUBSCRIPTIONS TO

INTERNATIONAL ORGANISATIONS SDR’S

TT DOLLAR SECURITIES

OTHER ASSETS

INCLUDING FIXED ASSET

TOTAL ASSETS

35,972,323 23,386,376 2,995,305 847,833 2,461,370 227,212 6,810,085 72,700,504

35,738,409 23,419,535 2,995,305 849,933 2,461,407 237,230 6,260,000 71,961,819

34,980,342 25,886,916 2,995,305 855,235 2,461,407 244,967 7,277,642 74,701,814

33,066,420 26,790,924 2,995,305 856,807 2,461,407 232,951 10,123,539 76,527,353

32,530,361 27,393,069 3,294,747 863,331 2,162,002 283,619 7,591,267 74,118,396

32,813,061 27,530,581 3,294,747 872,477 2,162,002 214,459 6,084,014 72,971,341

31,436,596 28,057,412 3,468,086 882,488 2,275,641 215,065 7,924,813 74,260,101

33,294,280 27,770,529 3,468,086 885,170 2,275,683 236,457 8,311,544 76,241,749

34,652,540 26,632,267 3,426,272 885,901 2,248,246 281,942 9,394,652 77,521,820

34,583,817 26,127,890 3,425,064 893,106 2,248,246 426,206 8,971,526 76,675,855

40,232,070 25,773,086 3,425,064 893,321 2,247,493 232,303 7,436,733 80,240,070

38,740,864 25,923,905 4,398,712 895,831 2,268,011 223,991 8,670,480 81,121,794

38,166,870 25,905,135 4,343,083 894,669 2,239,328 351,185 8,264,243 80,164,513

36,987,420 25,723,865 4,343,083 898,489 2,239,359 350,570 7,490,973 78,033,759

35,583,961 25,712,133 4,343,083 901,459 2,239,359 330,622 8,049,021 77,159,638

35,093,287 25,727,562 4,343,083 899,345 2,239,359 228,290 7,389,162 75,920,088

33,527,081 25,398,356 4,280,287 897,719 2,206,993 229,110 6,999,896 73,539,442

33,780,131 25,647,580 4,280,287 899,682 2,206,993 221,082 8,032,589 75,068,344

33,430,408 25,466,084 4,337,149 900,714 2,236,224 223,557 7,494,808 74,088,944

32,757,422 25,692,638 4,337,149 898,021 2,236,154 224,038 6,788,835 72,934,257

31,168,811 25,663,383 4,337,149 901,741 2,236,154 224,035 7,337,073 71,868,346

30,992,318 26,050,882 4,398,670 898,848 2,267,873 227,106 8,014,460 72,850,157

30,330,649 25,791,636 4,398,670 896,677 2,267,737 228,402 7,459,059 71,372,830

29,338,210 25,746,397 4,398,670 900,963 2,267,737 220,540 8,794,388 71,666,905

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RESERVE PERIOD ENDING

AVERAGE DEPOSIT LIABILITIES

REQUIRED CASH RESERVES

AVERAGE CASH RESERVES

5-Oct-1612-Oct-1619-Oct-1626-Oct-16

79,641,83579,811,07679,640,17679,647,888

13,539,11213,567,88313,538,83013,540,141

16,428,84416,440,75816,513,87816,788,619

2-Nov-169-Nov-1616-Nov-1623-Nov-1630-Nov-16

79,676,25379,759,98279,974,72480,092,00680,121,035

13,544,96313,559,19713,595,70313,615,64113,620,576

17,155,39716,943,69516,468,66517,481,40917,320,495

7-Dec-1614-Dec-1621-Dec-1628-Dec-16

80,350,05380,648,36581,050,85981,346,676

13,659,50913,710,22213,778,64613,828,935

18,399,29817,802,85717,075,74416,475,003

4-Jan-1711-Jan-1718-Jan-1725-Jan-17

81,423,25981,476,35981,212,41881,037,124

13,841,95413,850,98113,806,11113,776,311

15,554,80816,121,36716,030,02516,981,863

1-Feb-178-Feb-1715-Feb-1722-Feb-17

80,521,81280,236,55979,926,54779,765,682

13,688,70813,640,21513,587,51313,560,166

16,344,91617,845,65117,355,06717,835,359

1-Mar-178-Mar-1715-Mar-1722-Mar-1729-Mar-17

79,653,13579,508,39479,293,97679,236,45379,182,482

13,541,03313,516,42713,479,97613,470,19713,461,022

17,128,26517,977,45418,964,99117,939,38517,090,564

5-Apr-1712-Apr-1719-Apr-1726-Apr-17

79,292,35979,511,49479,466,29479,464,724

13,479,70113,516,95413,509,27013,509,003

17,110,09416,368,23816,537,88517,534,610

3-May-1710-May-1717-May-1724-May-1731-May-17

79,170,65379,235,08279,389,54179,586,89479,710,729

13,459,01113,469,96413,496,22213,529,77213,550,824

17,201,99716,486,97315,927,04017,107,08617,020,342

7-Jun-1714-Jun-1721-Jun-1728-Jun-17

79,818,87679,837,02979,724,93579,538,794

13,569,20913,572,29513,553,23913,521,595

15,892,11615,812,69216,830,85815,608,354

5-Jul-1712-Jul-1719-Jul-1726-Jul-17

79,395,07679,287,98879,316,10079,333,429

13,497,16313,478,95813,483,73713,486,683

16,575,54316,847,08915,997,47315,306,189

2-Aug-179-Aug-1716-Aug-1723-Aug-1730-Aug-17

78,957,98278,482,17678,160,09477,979,55377,971,365

13,422,85713,341,97013,287,21613,256,52413,255,132

16,093,22216,603,65216,092,60016,490,32716,278,798

6-Sep-1713-Sep-1720-Sep-1727-Sep-17

78,201,27678,259,35978,352,38876,142,571

13,294,21713,304,09113,319,90612,944,237

16,558,22916,283,64915,242,04914,688,281


T A AAVERAGE DEPOSIT LIABILITIES AND REQUIRED AND ACTUAL CASH RESERVESfor Period Ending September 2017 ($‘000s)

1

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RESERVE PERIOD ENDING

AVERAGE DEPOSIT LIABILITIES

REQUIRED CASH RESERVES

AVERAGE CASH RESERVES

5-Oct-1612-Oct-1619-Oct-1626-Oct-16

2,349,3002,334,6222,363,3112,389,556

211,437210,116212,698215,060

470,267469,095471,701374,114

2-Nov-169-Nov-1616-Nov-1623-Nov-1630-Nov-16

2,410,0222,434,4332,431,9562,409,8892,392,167

216,902219,099218,876216,890215,295

436,475460,755368,758366,584447,211

7-Dec-1614-Dec-1621-Dec-1628-Dec-16

2,357,8112,336,6002,351,0332,365,244

212,203210,294211,593212,872

442,285480,408431,874433,217

4-Jan-1711-Jan-1718-Jan-1725-Jan-17

2,397,9002,415,0562,431,2892,448,422

215,811217,355218,816220,358

436,364437,909439,617441,231

1-Feb-178-Feb-1715-Feb-1722-Feb-17

2,471,3562,497,6562,508,0442,527,544

222,422224,789225,724227,479

603,441605,823537,179545,661

1-Mar-178-Mar-1715-Mar-1722-Mar-1729-Mar-17

2,565,2672,586,7562,607,8892,607,0562,561,878

230,874232,808234,710234,635230,569

622,408624,419451,623451,838547,944

5-Apr-1712-Apr-1719-Apr-1726-Apr-17

2,519,4222,493,0002,477,2892,469,456

226,748224,370222,956222,251

244,421342,382341,300341,148

3-May-1710-May-1717-May-1724-May-1731-May-17

2,474,1222,466,3672,440,4332,412,6002,384,022

222,671221,973219,639217,134214,562

241,959341,381239,377237,029234,600

7-Jun-1714-Jun-1721-Jun-1728-Jun-17

2,346,6892,326,6672,300,9892,233,811

211,202209,400207,089201,043

231,340229,556228,235343,013

5-Jul-1712-Jul-1719-Jul-1726-Jul-17

2,165,5442,094,9562,041,1442,019,089

194,899188,546183,703181,718

387,023380,788426,190374,094

2-Aug-179-Aug-1716-Aug-1723-Aug-1730-Aug-17

2,010,2891,996,1671,982,5891,977,7221,965,567

180,926179,655178,433177,995176,901

408,335317,135315,769350,369314,282

6-Sep-1713-Sep-1720-Sep-1727-Sep-17

1,961,0781,963,7111,967,6001,974,811

176,497176,734177,084177,733

313,799338,963369,271269,813


T A AAVERAGE DEPOSIT LIABILITIES AND REQUIRED AND ACTUAL CASH RESERVESfor Period Ending September 2017 ($‘000s)

©Central Bank of Trinidad and Tobago 2017 ISSN 0069-1593

CENTRAL BANK OF TRINIDAD AND TOBAGO · The Trinidad and Tobago economy continued to feel the impact of the downturn in international energy prices and in domestic production of natural

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